Global stocks react badly to coronavirus update
It looks like efforts to contain the coronavirus outbreak have not been entirely successful, and stock markets around the world are now beginning to react more profoundly than before. The FTSE 100 was down almost 3.3% at the time of writing, from 7,403 points to 7,159.
For those not familiar with normal behaviour in markets, this is a pretty steep fall for a single morning’s trading. So what’s caused the new concern? Principally, it is that where the virus was largely contained to China and only a comparatively small number of cases and hardly any deaths outside the country, figures are now rising elsewhere.
The World Health Organisation said yesterday that there had been a grand total of 78,811 cases of the virus, but now 367 had been diagnosed overseas, higher than previously thought.
Governments in Europe are beginning to take measures similar to China – Italy has used emergency powers to limit the movement of people in the north of the country, threatening fines for anyone breaking the rules. Why? It has suddenly found itself host to the third-highest numbers of patients in the world, with 152 infected and three already dead.
The Euro Stoxx 50, Germany’s Dax and France’s Cac 40 indexes have all posted significant declines as a result. In Asia, the situation was worse, with South Korea’s Kospi falling almost 4% in response to news of a spike in the number of patients.
The picture is complicated by the differing government regimes – there is speculation that Iran has been covering up its true number of cases, and while the Chinese government appears to have been cooperating with global bodies it did behave secretively in the initial outbreak.
Primark owner reckons the disruption will hit clothing supplies
The owner of Primark, AB Foods, says some of its lines will be in short supply later in the year, depending on what happens with its factories and suppliers in China. Although ABF says it sources about 40% of its stock from China, it did also confirm that it normally stockpiles products ahead of the lunar new year to take account of this more regular slowing of production for the Chinese holiday season.
As a result, any shortages are not likely to be felt in the near term – it’s only once normal production season gets underway and only if it is disrupted further that problems will manifest.
Importantly, the firm has not issued any changes to its financial guidance for the full year, which would suggest it is not overly worried just yet. However, it is ramping up its arrangements with alternative suppliers in other global regions as an insurance policy – nobody knows how long this virus is going to remain a global threat. Bullish statements were not enough though: shares in the company were down this morning.
