Spreading fast ... Coronavirus. The contagious respiratory illness is alarming the world and dragging down global markets. It first broke out in Wuhan, China, but has expanded far beyond the fish/meat/live animal market where it originated:
- Over 2,700 people infected, with over 100 deaths
- The virus has spread to 13 countries, with 5 cases confirmed in the US
- Nearly 50M people are under quarantine in China — Travel restrictions are an attempt to contain the spread of the disease (as surgical masks are selling out across Asia)
Stocks take a hit... As fears of coronavirus intensify, US markets have been jolted out of the blissful serenity they've enjoyed since October. The Dow and the S&P 500 both fell Monday by 1.6% and the Nasdaq dropped 1.9%. Some sectors are feeling it more than others:
- Travel-related companies (think United Airlines, Marriott hotels, and Carnival cruises) were hit hardest and all traded lower — oil prices have also fallen because of reduced travel demand.
- Luxury fashion companies that rely heavily on Chinese buyers (like Burberry and LVMH also took a tumble — in 2018, Chinese consumers spent $115B on luxury goods
- Nike and Estée Lauder dropped too, since both now get nearly 1/5 of their revenues from China
- Some investors ditched stocks and bought into "safe haven" assets like gold and treasury bills
The world's 2nd largest economy is China... No surprise that a viral outbreak there hurts global markets. Oh, and this is all happening during the Lunar New Year holiday, China's busiest travel season (3 billion trips were expected) — the holiday was just extended to keep stores closed, and US companies that do business in China are suffering as well (like Starbucks). FYI, 2002's SARS outbreak cost the global economy around $40B.