So is this the week reality rolls over the ASX after its solid start for 2020.
The ASX futures fell more 84 points overnight Monday after Friday’s 43 point slide. That’s effectively a two-day slide of 127 points so big falls can be expected locally today.
That was after Wall Street sold off after markets in Asia and Europe weakened on Monday with losses of 1% to 2% in Asia and well over 2% in Europe.
The spread of the virus to Europe and the US, as well Australia will see travel-related shares such as Qantas, Virgin, Flight Centre, Webjet, Sydney Airport, Helloworld, Corporate Travel, Santos, BHP, Rio Tinto, Fortescue and Woodside etc in the firing line.
The real issue this week will be the rapid spread of the coronavirus through China and to at least 14 other countries. On top of that there’s a concerning surge in deaths and infection numbers in China.
Deaths in China now more than 80, there nearly 3,000 cases around the world, major cities are in travel lockdown, air travel has been banned across parts of China (at least 16 cities) and the Chinese government has extended the Lunar New Year holiday by an extra three days from this Friday.
All this will put a big dent on January and February economic data for real estate, production, retail sales and trade and almost certainly hit March quarter GDP.
The news will see a sell-off on the ASX later on Tuesday. US market fell more than 1.5% on Monday. The Dow lost 1.57%, the Nasdaq fell 1.53% and the S&P 500 shed 1.9%.
The Australian dollar, seen as a proxy for the Chinese economy and currency, also sold off, falling well under 68 US cents to trade at 67.58% at 8 am and down 1% on the session.
President Xi Jinping said at the weekend China was facing a “grave situation” as the death toll rose, overshadowing celebrations of the Lunar New Year that began on Saturday.
Hong Kong declared a virus emergency, scrapped New Year celebrations and restricted links to mainland China provinces. Schools in Hong Kong that are currently on Lunar New Year holidays, will remain closed until February 17.
Xi held a politburo meeting on Saturday on measures to fight the “accelerating” outbreak, Chinese state television reported.
The virus has also been detected in Hong Kong, Macau, Thailand, Taiwan, Japan, South Korea, USA, Vietnam, Singapore, Malaysia, Nepal, France, and Canada.
The US arranged a charter flight on Sunday to bring its citizens and diplomats back from Wuhan.
Australia has at least five cases in NSW and Victoria,
The ASX was hit by the reality of weak earnings for the December half last year. That was ignored up to Thursday, but now it has been overtaken by the rapid spread of the coronavirus through China and at least 14 other countries.
Deaths in China now top 40, there are more than 1,400 cases, major cities are in travel lockdown, air travel has been banned across parts of the China (at least 16 cities) and the news will see a sell off on the ASX later on Tuesday.
President Xi Jinping said China was facing a “grave situation” as the death toll rose, overshadowing celebrations of the Lunar New Year that began on Saturday.
Hong Kong declared a virus emergency, scrapped New Year celebrations and restricted links to mainland China. Schools in Hong Kong that are currently on Lunar New Year holidays will remain closed until February 17.
Xi held a politburo meeting on Saturday on measures to fight the “accelerating” outbreak, Chinese state television reported.
The virus has also been detected in Australia, France, Malaysia. Thailand, Vietnam, Singapore, Japan, South Korea, Taiwan, Nepal, and the United States.
The US arranged a charter flight on Sunday to bring its citizens and diplomats back from Wuhan.
Australia has at least four cases one of whom returned from China three weeks ago before coming forward. Three men from NSW and one Victorian male are in isolation in major hospitals in Sydney and Melbourne after coming forward with symptoms.
Forget all the nonsense peddled about the positive impact of the first deal in the Trump-China trade war, the emergence of the virus, its spread and deaths and now the Chinese government’s massive clampdown tells foreign investors all is not well in China.
And that is bad news for Australia as the fall in the value of the Aussie dollar to under 68 US cents on Monday tells us.
The ASX 200 will lose 1% at least and the fall could be as high as 2% if trading in futures on Friday and Monday nights is any guide.
The ASX rose 0.4% last week – much slower than the 1.9% jump the week before and 2.9% the week before that.
All Up the ASX 200 is up 6% so far in 2020, well ahead of Wall Street where the Dow has gained 1.5%, the S&P 500 2% and the Nasdaq 3.8%.
European markets are up by around 1.8%, Japanese markets are down 0.7% and Hong Kong and Shanghai are both down by 0.8% and 2.4% respective. Hong Kong and Shanghai both slumped on Friday by more than 3% and the losses continued on Monday with drops in China of nearly 3% and falls in Tokyo of 2%.
The ASX 200 rose 2.5 points, or less than 0.1 to close at 7090.5 on Friday, recovering some of the ground lost on Thursday.
Wall Street ended lower Friday, giving up early gains after US authorities confirmed a second coronavirus case.
The S&P 500 index fell 0.9% Friday, for its biggest one-day loss since October. 8, while the Dow shed 170.36 points, or 0.6%. The Nasdaq, which traded at an intraday record in early morning action, ended the day down 0.9%.
For the week the Dow lost 1.2%, while the S&P 500 dropped 1% and the Nasdaq fell 0.8%.
