Stock markets fell on Monday morning as concerns over a new strain of coronavirus emanating out of China spread around the world, infecting major indexes with fears that the contagion could leave the global economy feeling ill.
The virus, which has so far infected at least 2,700 people and killed 81 of them, seems to have emerged from a seafood market in Wuhan, China before spreading around the world. Canada confirmed its second presumptive case of the virus on Monday morning, in the wife of the man who is the first such case, who is currently in isolation at Sunnybrook Hospital in Toronto.
The city’s stock market is not immune to fears over the potential impact of the virus as the S&P/TSX composite index was down 147.89 points at 17,417.45. That’s a decline of almost one per cent.
Companies related to travel and tourism were among the hardest hit, with Air Canada shares down more than six per cent to $44.38. Air Canada shares have lost ground for five days in a row now, a timeline that begins when the first cases outside China were confirmed.
“Entering the new trading week, investors appear to be reading this as a still-worsening situation with uncertainty over its impact on business growing,” said Colin Cieszynski, chief market strategist with SIA Wealth Management in Toronto.
U.S. stock markets fared even worse, as the Dow Jones industrial average was down 455 points or almost two per cent, while the broader S&P 500 index was down 48.21 points of about 1.5 per cent. The tech heavy Nasdaq composite was down 174.27 points or almost two per cent.
Travel and tourism names were especially hard hit. Las Vegas-based gaming company Wynn Resorts, which has a large presence in the Chinese gambling hotbed of Macau, was off by more than 7.5 per cent. Shares in U.S. airlines United and Delta were both off by roughly five per cent.
Richard Smith, a professor of health economics at the University of Exeter Medical School, told The Canadian Press over the weekend that while travel and tourism companies are so far the hardest hit, “that ripples through the entire economy.”
“But many effects are short-lived during an outbreak as once the panic is over people go back to business as usual,” he said.
U.S. listed shares in Chinese e-commerce giant Alibaba lost about four per cent to $204 a share.
Wall Street’s fear gauge, the CBOE Volatility index jumped to its highest since Oct. 10.
“The coronavirus … will just elevate volatility due to the embedded uncertainty of things,” David Bahnsen, chief investment officer of The Bahnsen Group, wrote in a client note.
“The Dow is up a stunning 3,000 points in just over three months — it hardly needs an excuse to see volatility elevated.”
The Canadian dollar was down about a quarter of a cent to 75.83 US nearing midday. The loonie was mostly dragged lower because of slumping oil prices, which were themselves dragged down because of fears that the coronavirus will eat into demand for oil as the economy slows.
West Texas Intermediate lost $1.28 a barrel to $52.87. WTI has fallen every day since the virus first gained global attention last week, and the price of oil is now at its lowest level since October.