Bassanese Bites: Tough medicine – February 10 2020
Last week global markets managed to shrug off coronavirus concerns – helped by continued solid economic data in the United States. Indeed, there was a better than expected 225k gain in US jobs during January (market expectation 160k) helped by milder than usual winter conditions which usually boosts construction. Importantly, annual wage growth remains stuck around 3% – just enough to support consumer spending but not enough to stoke inflation concerns.
With more than 800 dead, the coronavirus has tragically now already taken more lives than the 774 taken during the 2003 SARS outbreak. But markets are taking some comfort from the fact that – so far at least – it has been largely confined to mainland China (which has reported 99% of the cases so far compared with only 65% during the SARS outbreak) and the overall death rate remains much lower at around 2% rather than 10%. There are also tentative hopeful signs that the daily number of reported new cases has started to drop.
Of course, Chinese economic growth will still likely take a massive hit this quarter, with knock on effects around the world, as it battles to contain the outbreak through trade and travel restrictions. One clear market result has been the slump in the oil price, which is now down 17.5% since the start of the year. The $A has also shed 5% of value this year, while the $US index has gained 2.4%.