Viral fears

Posted by: Paul Donovan

22 Jan 2020
  • Fears of the spread of a pneumonia virus caused risk markets to wobble yesterday. Asian trading has been more stable overnight. Comparisons to the SARS virus seventeen years ago suggest that this could be a market focus until March. 
  • Economically the focus will be on travel and consumer spending. Compared to seventeen years ago, online spending is more significant. That reduces the economic impact of the virus. However, most economic damage from a virus comes from fear. Social media is far more widespread today. We know that social media spreads fake news farther and faster than it spreads the truth. 
  • South Korea had stronger-than-expected GDP for the fourth quarter. Some of this was due to government spending, which is of limited relevance to the rest of the world. Some was due to investment by tech companies, which might reflect supply chain adjustment after US trade taxes against China. 
  • US President Trump went near to a mountain to prophesy great things for US-EU trade. Markets have learned to treat such predictions with caution. Bank of England governor Carney will be talking climate today.

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