CNN Business: Hong Kong/London: Stock markets plunged around the world Monday after the number of coronavirus cases surged in Italy and South Korea, putting two major economies at risk from a virus that has already caused widespread disruption in China.
The Dow (INDU) closed 1,032 points, or 3.6%, lower, marking its worst day in two years, when it closed down more than 1,000 points twice within a week as inflation fears gripped Wall Street. On February 5 and again on February 8, 2018, the Dow’s percentage drop was more than 4% on both days.
Since the index is higher now, on a percentage basis Monday’s selloff isn’t as dramatic as other drops in the Dow’s history.
Still, it was only the third time in history that the index closed more than 1,000 lower. It is now in the red for the year and at its lowest point total since December 11.
The S&P 500 (SPX) and the Nasdaq Composite (COMP) also fell sharply. The S&P ended down 3.4%, while the Nasdaq dropped 3.7%. The VIX (VIX), a measure of market volatility, shot up more than 46%.
The declines in the United States follow steep losses in Asia and Europe on Monday as investors take in the risks to corporate profits and economic growth posed by the coronavirus’ spread.
A growing number of companies are warning that the coronavirus will prevent them from meeting sales or profit targets for the first three months of the year. Reduced demand for goods and services, and factory closures in China, are also expected to knock the global economy and weigh on trade at a time when Japan and Germany are already teetering on the brink of recession.
The stock market reaction to the outbreak had so far been rather muted, and US stocks have notched a string of record highs. But the spike in the number of cases in Italy and South Korea, the world’s eighth and twelfth largest economies, raises fears of a pandemic and ups the stakes for businesses and investors.
The World Health Organization is preparing for a potential pandemic, said WHO Executive Director Mike Ryan.
Meanwhile, London (CNN Business) reports the emergence of hundreds of coronavirus cases in two major economies outside China has dashed hopes of a speedy recovery from an epidemic that has already wreaked havoc on global supply chains and hit company profits.
The number of infections in South Korea, a major producer of cars, electronics and machinery, has shot up to more than 830. Italy, which started the weekend with a handful of cases, now has nearly 220 and five confirmed deaths. Officials have shut down public buildings, schools and sports events in some parts of the country’s industrial north.
With Japan already reporting hundreds of infections, four of the world’s top 12 economies — representing about27% of global GDP — are now scrambling to contain the virus. A fifth — Germany — is teetering on the brink of recession.
The spike in cases outside China signals a new phase in the battle against coronavirus, greater risk for companies and their workers, and global economic growth.
It may not be called a health pandemic yet but it is an economic pandemic.
Officials and business leaders had been that dramatic action taken by China would slow the spread of coronavirus and prevent it from gaining traction around the world.