U.S. stocks ended the day higher on Thursday after the World Health Organization declared the coronavirus outbreak that has spread to at least 19 countries, killing more than 200 people and infecting nearly 10,000, more a global emergency.
What it means: The declaration was taken as good news by bullish investors because the international organization said China's "unprecedented response" and international cooperation would “reverse the tide” and contain the outbreak.
- WHO director-general Tedros Adhanom Ghebreyesus lauded the "extraordinary measures [China] has taken" in a press conference Thursday.
- He added that there was "no reason for measures that affect international travel and trade," sparking hope that airlines could soon restart routes to China and businesses might get the green light to open their doors.
- China's stock markets have been closed for the Lunar New Year holiday and are scheduled to open on Feb. 3.
Why it matters to the market: The risk that the outbreak could cause further disruptions to business and drastically reduce aggregate demand from China was the outbreak's biggest risk, from a business perspective.
- That would damage not just China's economy, but — as the world's top trading nation — it would have a major negative impact on trading partners like Japan, Germany, Australia and Brazil.
- “Declaration of an international emergency will undoubtedly sharpen governments’ focus on protecting citizens,” Jeremy Farrar, head of the Wellcome Trust, a U.K. charity that funds biomedical and public health research, said in a statement.
What they're saying: “Some shorts covered after the director gave the WHO’s stamp of approval to China’s aggressive containment effort,” Stephen Innes, Asia Pacific market strategist at AxiCorp, told Reuters.
- “For now, the market’s risk lights have shifted from flickering on red to a steady shade of amber, which could bring more risk back into play.”
Yes, but: Other assets, like commodities and U.S. Treasuries, suggest the coronavirus fears are far from over.
What's next: The U.S. State Department raised its travel advisory for China to Level 4, telling Americans, “Do not travel to China."
- “Those currently in China should consider departing using commercial means,” it added in a statement.
The last word: With most headline-grabbing companies having now reported earnings, the market will likely go back to focusing on economic reports next week.