The market impact of coronavirus has begun to spread

The floodgates
Are opening. Companies are beginning to warn that the coronavirus outbreak will
affect earnings, and stocks have started to react negatively. Yesterday, Apple
announced that the contagion will make it miss revenue forecasts. The issues are on both the sales and production ends: Most Apple
stores in China stay shut, and while Apple factories there have reopened,
they’re not working at full capability but rather are ramping up
manufacturing. In addition, Tesla and Alibaba have recently provided
coronavirus-related earnings warnings. Alibaba has gone so far as to label ldquo the outbreak a & swan event. ”

Investor worries extend beyond tourism industry

Many investors had been concentrating on the lines of their
Epidemic — the impact on transportation and tourism. And people are very
legitimate concerns, particularly since airlines such as United and American
have announced they won’t even resume regular service to China till April 24 — and
there’s always again. Now, However, That this contagion will have an impact on both production and demand for
a variety of businesses has become front and center in investors’ heads.  

Factories in China stay closed, and That’s currently sending shock
Waves through the supply chain.  For instance, Nissan was briefly forced
to close a mill in Japan due to a shortage in Chinese parts. The
Chinese automakers’ institution is even forecasting that auto sales in China
will probably fall over 10 percent in the first half of the year.1

In addition, the impact of the coronavirus has been significant enough that OPECcut
Its forecast for global growth in oil demand this year.  Needless to say, this
shouldn’t come as a surprise: China consumes a lot more oil today as it did
during the SARS outbreak in 2003, and so it’s going to have a bigger impact on
oil demand.

Many questions
remain about the virus

The most
Difficult portion of this situation is not having full info on this
specific virus that a vaccine can be made the virus may be able to
mutate, and most importantly, how quickly the virus could be included. The wisdom far has been to assume that a trajectory very similar to that of
SARS. However the World Health
Organization Director-General cautioned against assuming the scenario would be
under control by April, implying it would still proceed “in any direction. ” We are encouraged by reports that infection rates are currently slowing at the
epicenter of the coronavirus, but we’re currently following the situation carefully.

Despite these
Unanswered questions, I would like to feel that governments such as China and
the US will offer. China continues to supply significant policy stimulus,
including in the past several days. And in his testimony before
Congress, Federal Reserve Chair Jay Powell confessed the
coronavirus hazard, recognizing it’ll affect China and many of its trading
partners — including, probably, the US. Powell even left the door open to
the possibility that the effects could be important enough to lead to a
“substance reassessment of the prognosis. ” We don’t believe the Fed stands ready to
act and offer insurance cuts & rdquo or more & ldquo; one; at the surface of the contagion.

We think we’re looking at the situation with eyes. We
Recognize that earnings of firms will be affected in the brief term. We
expect China’s economic growth in
the first quarter to likely fall. We have
assurance that policy service will be sufficient and do think the market will
snap as the contagion stabilizes — we still see it behaving likewise to a spring because of pent up demand and opinion around the
US-China Phase 1 trade deal. We are confident this will occur — we don&rsquo. Before the situation develops, and there could be some pain. This
suggests traders watch and wait for buying.

1 Source: Reuters, “China’s auto sales may
Drop 10 percent in H1 because of coronavirus – sector institution,” Feb. 16, 2020

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The
Opinions referenced above are those of the writer at Feb. 18, 2020. All these
Comments shouldn’t be construed as recommendations, but as an example of
Broader topics. Forward-looking statements are not guarantees of future
results. They involve assumptions, uncertainties and risks ; there could be no
Assurance that actual outcomes will not differ materially from expectations.

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