The Covid-19 virus is getting worse in some places, especially Italy but it is also getting a hold in Spain.
And following a bad week on sharemarkets in the last two weeks there are even bigger drops this week, with the Dow Jones slumping.
At the same time oil prices have crashed by more than 20%.
The spread of the virus seems under control in New Zealand for now, but the economic effects are significant with Air New Zealand scaling back operations and many businesses under stress.
We may benefit from plunging oil prices, but our stock market (and Kiwisaver investments) is suffering, and it is likely to follow \world markets down and get worse today.
And problems around the world are much worse, especially currently in Italy where they are shutting down a lot of the country to try and stop the virus spreading.
Reuters: EU seeks to tackle coronavirus as Italy locks down north, prisoners riot
EU leaders will seek a coordinated response to the coronavirus after global markets plunged on Monday and Italy sealed off much of its industrial north, where six prisoners were killed in a riot over curbs on visits.
Joining the global rout, triggered by a 22% slump in oil prices, Wall Street’s main share indexes dropped 7% and the Dow Jones Industrials crashed 2,000 points – which would be its biggest ever one-day ever if there is no recovery by the close.
More than 110,000 people have been infected in 105 countries and territories, and 3,800 have died, the vast majority in mainland China, according to a Reuters tally.
With Italy’s economy already on the brink of recession, bars and restaurants in Lombardy were ordered to close or to restrict entry and maintain a distance of at least a meter between people on their premises.
Major sporting events in Italy, including top-flight Serie A football, will be played without spectators for a month.
This must have a major impact in the Italian economy. And the virus is spreading in Spain.
In Spain, schools were closed in the town of Labastida near Vitoria in the Basque country after nearly 150 cases of coronavirus were identified in the region.
Spain has reported 999 cases in all, most of them in two areas around Madrid and around Vitoria in the north. Prime Minister Pedro Sanchez said it had prepared an emergency plan to deal with the economic consequences of the virus.
It is improving in regions that were first hit.
China and South Korea, Asia’s second-worst-hit country, both reported a slowdown in new infections.
Mainland China, outside Hubei province, center of the outbreak, reported no new locally transmitted coronavirus cases for the second day on Monday, but a top Communist Party official warned people against dropping their guard.
South Korea reported 165 new coronavirus cases, bringing the national tally to 7,478, while the death toll rose by one to 51.
The New Zealand Government is rolling out economic measures.
Beehive: Cabinet approves Business Continuity Package in response to COVID-19
Cabinet today approved the development of a Business Continuity Package to help support the economy through the disruption caused by COVID-19.
The Business Continuity Package includes:
- a targeted wage subsidy scheme for workers in the most adversely affected sectors.
- training and re-deployment options for affected employees; and
- working with banks on the potential for future working capital support for companies that face temporary credit constraints;
As part of the package:
- The Treasury and IRD have been directed to develop tax policy options in line with the goal of reducing the impact for affected businesses, to support businesses to maintain operational continuity.
- The Treasury and MSD have been directed to develop policy options to support households to maintain incomes and labour market attachment.
The detail of this package is now being worked through. It will be discussed again at the Cabinet COVID-19 committee on Wednesday, and the Government expects to be in a position to make further detailed announcements next week.
So a bit of dabbling so far.
“New Zealand is well-placed to respond to COVID-19. We have been running surpluses and our net debt position at 19.5% of GDP is well below what we inherited, and well below other countries,” Finance Minister Grant Robertson says.
But if world markets crash they will drag us down, and that could have a major impact.
Newshub: BNZ becomes first major New Zealand bank to predict a recession
BNZ is now using the much-dreaded R-word, saying it’s more than likely there’ll be a recession this year.
“Everyone sort of panics when they hear the word recession,” BNZ head of research Stephen Toplis said. “It’s like the whole world’s going to fall in.
That may be happening now.
CNBC: Oil nosedives as Saudi Arabia and Russia set off ‘scorched earth’ price war
Oil prices fell through the floor in early trading Monday, tanking as much as 30% after Saudi Arabia slashed its crude prices for buyers. The kingdom is reportedly preparing to open the taps in an apparent retaliation for Russia’s unwillingness to cut its own output.
- Oil prices are down nearly 50% for the year after OPEC+ talks collapsed and Saudi Arabia announced slashed prices in an apparent price war with Russia.
- With previously agreed OPEC+ production cuts expiring at the end of March, Saudi Arabia and Russia can theoretically pump as much crude as they want.
- An oil price war will have massive geopolitical consequences, pummeling markets already shaken by the new coronavirus, COVID-19.
Reuters: Wall Street pounded by oil crash, virus fears
Wall Street’s main stock indexes plummeted about 5% on Monday, as a slump in oil prices and the rapid spread of the coronavirus amplified fears of a global recession on the anniversary of the U.S. stock market’s longest bull run.
The energy .SPNY index plunged 18.2% to its lowest level since August 2004 and crude prices were on track for their worst day in three decades as Saudi Arabia and Russia moved to significantly ramp up production after the collapse of a supply cut agreement. [O/R]
Companies listed on the S&P 500 have now lost more than $5 trillion in value in a sell-off sparked by fears that the coronavirus epidemic could tip the global economy into recession.
That report is out of date, Wall Street has got progressively worse through the day, with several trading haalts to try to pause the slide.
At 2:15 pm Monday in New York the Dow Jones is down 7.3% for the day.
The NZX already dropped 2.94% in Monday trading and will be affected by international markets today. All we can do is wait and see what happens.
And all the New Zealand Government can do is try to limit the damage here, but the may be chasing a bear.