Share prices fall in response to coronavirus alarm

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The FTSE has fallen sharply as fears over the spread of coronavirus gathered pace over the past 24 hours although the number of fresh cases in China is now said to be falling.

Companies particularly affected by the fall in share value include airlines such as EasyJet, Tui and British Airways owner International Airlines Group. Airlines have so far cancelled more than 200,000 flights globally because of the virus’s spread and the resulting fall in demand for travel.

Gold surged to its highest price in seven years as fears over the virus prompted investors to seek safety.

Travel restrictions and factory shutdowns caused by Covid-19 have led to major issues for oil-producing countries; not least a rapid decline in oil price as consumption and production falls away. This has alleviated the difficulties faced by airlines as they have benefitted from lower jet fuel prices.

The pound and euro have both lost value against the dollar because the US has so far seen relatively few cases.

However, a spokeswoman for the Word Health Organization, Margaret Harris, told the BBC that the situation did not yet amount to a pandemic because the spread of the virus was being slowed by countries’ actions. She said: “If countries took no measures at all we would have seen way, way, way more cases. That’s what we mean by containment.”

Oxford Economics, a global trends forecaster, predicted today that 2020 global growth would slow to just 2.3%, the weakest performance since 2009. It stated that “rapid spread of the coronavirus will weaken China’s growth sharply in the short-term, causing global disruption. While there were signs in early 2020 that the worst was over for world trade and manufacturing, that optimism has been dashed by the outbreak”.

It added that global conditions would strengthen in the second half of the year as disruption faded.

According to the organisation an Asia pandemic would cut world GDP by 0.5% while a global pandemic would cut it by 1.3% with Europe and the US pushed into recession.

Daniela Ordonez, the lead eurozone economist at Oxford Economics, warned: “A worsening of hard eurozone data is likely to follow since the fragility of global supply chains means even small disruptions in China’s output could still have large repercussions for Europe down the line.”

She added: “For now, we continue to believe that the epidemic will be contained to the first half of 2020, so the German and eurozone industrial recovery will not be derailed but only delayed until the second half of the year. Of course, this outlook could deteriorate rapidly should the virus, now spreading to developed countries, fails to be contained.”

In Italy, where there have been seven deaths from Covid-19, several small towns and villages mostly in the northern Lombardy region have been effectively quarantined, and there has been a sharp rise in cases worldwide, particularly in hotspots within Japan, South Korea and Iran. There are four new cases in the UK.

So far, about 90% of the 220 cases in Italy are centred on the town of Codogno, which is being patrolled by police with nobody allowed in or out.

Trains to and from Italy, Germany and Austria have been disrupted as passengers have been tested for the virus and business events, such as Milan fashion week, severely disrupted.

In China itself, the source of the outbreak, the numbers of new cases is said to be falling sharply. Bruce Aylward, the head of a team of WHO experts visiting China, said a number of “multiple sources of data” pointed to declines. “This is falling and it is falling because of the actions that are being taken,” he added said.

The UK government has downplayed the risk to the UK from the virus stating the country was well prepared to deal with its spread, with the risk to individuals remaining low.

While there has been some disruption to supply chains, particularly in higher value manufactured goods, with JCB among firms reporting a shortage of components, retailers have not yet signalled any significant supply problems. Primark, for example, this morning told the Financial Times it was not expecting any serious disruption to supplies because of the availability of alternative manufacturers. It currently sources 35% of its products from China.

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