Apologies for the repetition, but the new coronavirus is causing such a serious global reaction today it would be silly to focus on other things, so here are four key stories about what looks to be developing into a full blown international crisis.
The FTSE 100 has lost nearly £200 billion in the collective value of its companies taking it to its worst weekly performance since December 2008 when the global financial crisis was in full swing, and its lowest total market capitalisation since 2016. Virtually every stock has sustained losses, with the owner of British Airways, IAG, suffering went as low as a 7% drop for admitting that the spread of the virus is hitting home, but has recovered to a position of just 2.6% losses. Easy Jet fell by as much as 5% in early trading but has since recovered all of those losses versus its closing price yesterday. The major package holiday firm and airline TUI is down 6.5% at the time of writing. Airlines all over the world will begin the feel the pain if they haven’t already – a double whammy of governments locking down regions or suspending routes, and also massively depressed consumer demand for flights. The public do not want to jet around the globe knowing that it is exactly this that is causing the virus to spread.
The picture worsens considerably when you look at the global stock market data. Bloomberg is reporting this morning that six trillion dollars have been wiped off the value of the world’s companies since 20 January, which is when the first case of the disease jumping from one human to another was recorded by the Chinese government.
The governor of the Bank of England, Mark Carney says Britain is heading for a growth downgrade in an interview with Sky News this morning. He says supply chains are getting tighter, banks are beginning to activate their contingency (read: emergency) plans, there will be a tourism slump and so on. He says the Bank is monitoring the financial system very carefully in case there is a crisis.
Here’s his quote from the interview in full: “What we are picking up with some of our bigger companies and companies around the world is that supply chains are getting a little tight – that’s lower activity. There’s less tourism as you can see on our streets here in the UK, that’s lower activity as well. We would expect world growth would be lower than it otherwise would be, and that has a knock-on effect on the UK. We’re not picking that up yet at all in the European and UK economic indicators, but if the world is slower than the UK, a very open economy, will have an impact.”
The Geneva Motor Show has been pushed back to September after the Swiss government put a blanket ban on large gatherings of people. The show organisers described the postponement as the “wise” thing to do, but it is obvious they were not given any choice in the matter. Still, they cited difficulties in delegates being able to obtain visas and book flights from the most-affected areas, and as an internationally renowned show, a very large part of their target audience will be from China.
The World Bank is under fire over its $500m funding for poor countries to deal with health emergencies as health professionals say it is “too little too late” for the current crisis. A product called a ‘pandemic emergency financing (PEF) bond’ was introduced back in 2017 by the then president of the bank, Jim Yong Kim, in the wake of the Ebola crisis. The idea was to have a system for directing money extremely rapidly to poorer countries in the event of a pandemic in order to save lives and potentially entire economies, but experts are saying the terms attached are “insanely” complex and make it difficult for the money to be released within a time frame that would actually make a difference in a pandemic situation.
The Guardian reports that Olga Jonas, a senior fellow at Harvard Global Health Institute (and who worked as an economist at the World Bank itself for 30 years) said: “The whole mechanism is highly unfortunate. The objectives were to help the poorest countries respond quickly to outbreaks. Infectious disease spreads exponentially and the coronavirus has a very rapid growth rate. But the bonds only get triggered when the disease has spread for a long time.”
He saved the sucker-punch till last: “What’s obscene is that the World Bank set it up this way. It waits for people to die.”
To end on something slightly lighter, soap company Lush is giving our free hand washes in light of the public health advice to make sure you wash your hands frequently. It began advertising in its own shop windows today that passers-by are welcome to pop in, be given the use of a sink and some soap and will not be expected to buy anything. An absolutely brilliant piece of PR piggybacking on government health advice: if it brought in just 10,000 people nationally off the street then they are bound to like the famous in-store fragrance and waftiness, and walk out with a purchase of their own.
It might also go some way to offsetting the losses the company is enduring in the Far East – Japan is its second biggest market in the UK, and Hong Kong and South Korea are also important streams of revenue. It said even in Italy, where the situation only recently because particularly noteworthy, has seen a sharp drop in the amount of footfall to its stores.