- The virus spreading across China could slow its economic growth by 1.2 percentage points.
- The coronavirus has sickened about 900 people and killed 26 so far.
- Chinese authorities have locked down a dozen cities and restricted the movements of 30 million people.
- However, stocks rose on positive signs for EU interest rates and European manufacturing.
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The virus sweeping across China could knock 1.2 percentage points off the growth rate of the world’s largest economy, S&P Global Ratings estimated, according to Bloomberg.
The SARS-like coronavirus has infected around 900 people and killed 26, prompting Chinese authorities to lock down a dozen cities and restrict the movements of 30 million people. While the World Health Organisation declined to categorise the outbreak as a global health emergency on Wednesday, analysts fear it could spread far and wide this weekend as hundreds of millions of people travel to celebrate Chinese New Year.
The International Monetary Fund currently expects China to grow 6% this year. The S&P estimate, which assumes a 10% drop in consumer spending on discretionary goods and services such as transport and entertainment, suggests that could fall to 4.8%. The Chinese economy already slowed to 6.1% growth last year, down from 6.6% growth in 2018.
“It’s potentially huge,” Neil Wilson, chief market analyst of Markets.com, told Business Insider. “We simply don’t know what the impact or even the potential impact could be. We only have SARS in 2003 to base assumptions on.”
China’s real GDP growth slowed from 11.1% in the first quarter of 2003 to 9.1% in the second quarter, suggesting SARS had an impact of about 2 percentage points, according to CEIC data.
Stock markets largely shrugged off the virus fears on Friday. Investors cheered ECB boss Christine Lagarde’s plan to keep interest rates at current levels or below until inflation nears 2%, and maintain the bank’s bond purchases until shortly before rates normalize.
Traders also welcomed the release of IHS Markit Purchasing Managers’ Index data, which indicated robust manufacturing sentiment in France and Germany and a post-election recovery in the UK.
Here’s the market roundup as of 10:20 am (5:20 A.M. EST):
European equities rose with Germany’s DAX up 1.3%, Britain’s FTSE 100 up 1.6%, and the Euro Stoxx 50 up 1.4%.
US stocks are poised for a positive open with futures underlying the Dow Jones Industrial Average and S&P 500 up 0.2%, and Nasdaq futures up 0.3%.
Mainland China markets were closed. Hong Kong’s Hang Seng climbed 0.2% during shortened trading hours.