The virus sickens stock markets

As we feared last week, the reality of Chinese closures, damaged supply chains and worried consumers has hit world equity markets. The wall of money central banks have been injecting led people to anticipate a short, sharp decline and recovery which they could look through whilst driving shares higher.

Suddenly, investors show concern that the virus is not yet under control. They see that it is spreading to South Korea, Iran and Italy and may spread further. They ask themselves more taxing questions about how much output and income China is now losing this quarter, and what impact will falling international travel, reduced high-end luxury purchases, fewer trips to shops, entertainment and conference venues, less oil demand and the other signs of consumer worry have on world growth and company profits.

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