The big news this morning is the complete reversal of the story the infection rate on the Covid19 virus was slowing. The sudden 15k rocket in infections is apparently due to new guidelines on how to record it, but the largest daily death toll – thus far – confirms this is the most serious pandemic in decades, dwarfing SARS in scale and speed. SARS caused a massive economic and market hit. We’re concerned about the rising mortality and the timing delays, and mismatch with the number of cured patients. Keep an eye on this page: COVID-1 by John Hopkins CSSE. The rising ratio between deaths and infections in Hubei far exceeds the very low ratio we’re currently seeing in Covid19 cases elsewhere – that should be ringing alarm bells.
But we’re not here to talk about medical issues. Go scare yourself watching the BBC or Netflix documentaries on Epidemics if that will help.
The Coronavirus is now moving into the clear and visible economic damage stage:
· DBS in Singapore is unlikely to be the only bank that locks the doors to the Trading Floor for a deep clean. Oil prices have fallen.
· The rising infection rate on the quarantined cruise ship will force governments to back stringent and damaging containment measures, making economic slowdown inevitable.
· The cancellation of events like a global wireless conference (city-break bargains in Barcelona later this month?), casinos warning of slowdown in Macao and Las Vegas, the Hong Kong Sevens being postponed, and the empty Singapore airshow, confirm massive global damage to the travel sector.
Go figure how a travel slowdown impacts everything from plane makers to global supply chains.
All we can do is grin and bear it – hoping that Donald Trump’s assurances it will go away in April when the weather gets warmer come good. Hope is never a strategy. I think I shall wait for the scientists to opine…
But the science is worrying. Although the WHO has been praising China for its efforts and openness, – something has been awry about the numbers since the start. The early efforts of Chinese local authorities to downplay the contagion, and to scale back its scope are feeding a host of conspiracy theories. I reckon we are still two weeks behind the virus truth due to China delays.
The fact US teams are being “slowed” from accessing “ground zero” hint the Party is embarrassed and may still be hiding something. Incompetence has already claimed a number of heads, but what else aren’t we being told? How far up the Party structure will the blame game go? A quick glance at some of the more speculative new sites highlights speculation about mass graves, soaring death rates, and the inevitable Zombie invasion of re-animated plague victims. (I made the last bit up..)
I’m not a medical expert – but I’ve got the experience to spot an economic shock hitting markets. This is not speculation about a virus that might be slightly worse than the flu. This is about economic damage.
The fact stocks and bonds have pretty much discounted Covid19 has been the action of a market high to the rafters on bubbles, implausible valuations and the expectation central banks will do anything to support markets.
I think the music just stopped.
Bill Blain is a well-known City of London commentator, and has 35 years’ market experience as an investment banker. He currently is Strategist at Shard Capital, a London-based boutique.
Republished from the Morning Porridge by permission.