Updated: Feb 2
The Coronavirus is not just spreading fear into people all over the globe, it also puts terror in investors. U.S. stocks tumbled this week, with the Dow and S&P 500 recording their biggest one day drop since August.
But why is a virus affecting the markets and will the markets jump straight back on the bull train when things are calming down? Or is this the start of the coming bear market we've been hearing about for several years in the mainstream media?
Since the outbreak of the virus we've seen huge headlines who most certain affects the markets and world wide economic growth:
Disney has closed down its mega theme park in Shanghai as fear grows over the deadly virus. The resort made the announcement on its official website, saying the closure was "in response to the prevention and control of the disease outbreak."
Russia has ordered the closure of its huge land border with China as Moscow scrambles to prevent the deadly coronavirus infection spreading from its southern neighbor.
Apple is closing all offices, stores and contact centers in mainland China and is restricting employees traveling to the country.
Australia’s largest airline Qantas Airways, and Cebu Air, the Philippines’ largest budget carrier, American, United and Delta Airlines all announced they’d halt flights to China. Automakers Honda and Nissan have evacuated workers from Wuhan and Starbucks has closed more than 2,000 locations in mainland China.
The list goes on, and on, and on. These are some of the worlds largest companies and China is a huge economy having a major impact on the rest of the world.
Is this panic and fear we've seen in the markets last week rational?
Well, the World Health Organisation (WHO) has upgraded the global risk from the coronavirus outbreak from 'moderate' to 'high'. In China, the WHO has placed the risk assessment at 'very high'.
If the coronavirus is deadly for the average human, or if it's only dangerous for certain vulnerable groups is yet to be found out. But one thing is certain, and that is that the big global corporations are putting their shields up and they're not taking any chances.
No one knows how long this will last or what impact it might have. But the financial markets has shown us that it does not like this at all.
On the other side
We've seen several positive earning reports the last week. Among those are Tesla and Amazon.
Tesla has reported 4th quarter results, and it’s a beat on earnings. The stock spiked as much as 13% on the news after hours. Tesla said it expects positive cash flow and net income on a continuing basis going forward, with possible exceptions as it launches and ramps up production for new products.
Shares in Tesla have risen by more than 120% since the company’s Q3 2019 earnings update in October last year. At that time, Tesla notched a surprise profitable quarter following deep spending cuts, expansion of Model 3 sales outside the U.S. and the recognition of at least $30 million in revenue related to an Autopilot update that brought Tesla vehicles a so-called "Smart Summon capability.
Another stock who shows no fear over the dreaded coronavirus is Amazon.The share price jumped 11% when delivering a better result than expected, with quarterly profit coming in at $6.47 a share. Analysts had expected $4.04 a share, with profit weighed down by increased spending to build out Amazon Prime shipping services. Amazon is now an even stronger powerhouse in e-commerce, online video and cloud computing.
Disclaimer: The author of this article is not a doctor and have no knowlege about deadly or non deadly viruses,(but I do enjoy a cold Corona with a slice of lime in it every now and then) and I don't own any shares in the companies mentioned above, except Disney.