Markets wake up with a jolt to the implications of covid-19

WHEN AMERICA, the hub of global capital, is this far into an economic expansion and a bull market, investors feel two conflicting impulses. They hope that the good times will last, so they are reluctant to pull their money out. They also worry that the party may suddenly end. This is the late-cycle mindset. It reacts to occasional growth scares—about trade wars or corporate debt or some other upset. But it tends not to take them seriously for long.

Covid-19 is a grave threat to the market’s poise. News from Italy of the biggest coronavirus outbreak outside Asia led to a 3.4% decline in the S&P 500 index of American stocks on February 24th, the biggest one-day fall for two years. The rout encompassed global stockmarkets, which were down sharply from highs reached earlier in February. As The Economist went to press, the markets remained nervy. In the face of such uncertainty, more days like Monday are to be expected.

Investors have, sensibly, tried to calculate which assets are most exposed to the shock. Copper, an economic bellwether, plunged. The worst-hit stocks were of firms that rely on far-flung supply chains, such as carmakers; or are directly affected by restrictions on travel, such as airlines; or are most exposed to a China-led global slowdown, such as oil firms....



via The Economist: Finance and economics Business Feeds

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