Feb 24, 2020 - Economy

Coronavirus shakes the global economy

Health workers spray disinfectant in Seoul

Health workers spray disinfectant in Seoul on Feb. 24. Photo: Chung Sung-Jun/Getty Images

New cases of the novel coronavirus have rocked asset prices in Japan, South Korea and Italy, as those nations and others have ratcheted up emergency efforts to contain the outbreak.

What's happening: Asian stock markets continued to tank overnight, as South Korea's Kospi dropped nearly 4%, Australia's ASX fell by 2.3% and Hong Kong's Hang Seng declined by 1.8%. MSCI’s index of Asia-Pacific stocks outside Japan touched its lowest since early February.

  • Currencies also have sold off, led by the Japanese yen and Korean won, which have fallen to their lowest levels against the dollar since May and September, respectively, in the past week.
  • The euro clawed back some losses against the dollar after dropping last week to its lowest versus the greenback since mid-May.
  • S&P 500 futures prices were lower by 1% ahead of the market open after dropping by more than 1% on Friday.

Driving the news: South Korean President Moon Jae-in called for “emergency steps in this time of emergency” on Sunday after the country reported more than 160 new cases of the coronavirus, a number that grew to 833 total infections this morning. The government raised the infectious disease alert to its highest level.

  • That followed Italy's announcement of emergency measures — including quarantines for several northern towns — as confirmed cases spiked from three to 132 in a matter of days. It's now thought to be near 200, making it the largest outbreak outside of Asia.
  • Iran announced its first infections last week and said Monday it had confirmed 43 cases and 12 deaths.

What they're saying: Finance ministers and central bank governors of the world's largest countries pledged to "enhance global risk monitoring" and warned the coronavirus posed a serious threat to global growth during their weekend meeting in Riyadh, Saudi Arabia.

  • The group of G20 leaders said in their official communique that the virus was central to their discussions.
  • IMF head Kristalina Georgieva revised down the organization's 2020 growth forecast for China by 0.4 percentage points to 5.6% along with an expected 0.1 percentage point decline in global GDP because of the virus.

The big picture: “The news flow from the weekend has changed the game somewhat, where the focus is much more on the threat of an outbreak outside of China,” Chris Weston, head of research at broker Pepperstone, told Reuters.

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