- China likely to see flat to negative growth with disruption from coronavirus
- The global economy will likely suffer from China’s impact
- Investors should brace for continued market volatility
Global stocks have fallen sharply following confirmation that the coronavirus has spread to Italy, South Korea and Iran, raising fresh questions about the potential impact on global economic growth and business sector supply chains dependent on China.
After reaching a record high on February 17, the S&P 500 Composite Index has declined by 12%, as of February 27, suffering its first market correction since 2018.
A rising number of infections in Europe, in particular, has prompted markets to re-evaluate concerns about a global pandemic, even though the number of reported cases in mainland China has declined since news reports about the outbreak accelerated around the 17 January.
“Until this week, the consensus market view of the coronavirus has been fairly benign, but now as it spreads beyond Asia, investors are clearly taking it more seriously,” says Capital Group portfolio manager Jody Jonsson. “The market is starting to consider what it means for global trade and travel. The bond market is worried about recessionary conditions in certain areas, including China, Japan and potentially Europe.”