“It’s still far from business as usual in the world’s second-largest economy,” says Michelle Toh on CNN. Three weeks after the coronavirus outbreak prompted the closure of factories, offices and schools in China, emergency public holiday extensions are coming to an end.
Some factories have reopened with strict screening precautions and many businesses are encouraging employees to work from home. Yet others have extended leave for another week and in Hubei, the province at the centre of the outbreak, “life remains mostly at a standstill”.
A global growth hit
Investors have shrugged off the ongoing disruption caused by the virus. Global equities rose by 3.1% last week and have regained the bulk of coronavirus losses, notes Rupert Thompson of wealth manager Kingswood. American stocks enjoyed their best weekly gain since last June.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The S&P 500 and Nasdaq indices and Europe’s Stoxx 600 index all hit new record highs this week. Asian and emerging markets have recouped about half of their losses. China’s CSI 300 index has gained 7% over the past week.
The market has concluded that the crisis is a temporary problem and will be followed by a V-shaped recovery, says Mohamed El-Erian on Bloomberg. Yet disruption to complex global supply chains is generating “cascading spillovers” as factories within and beyond China are forced to slow down production for want of the correct widgets.
On the demand side, retail and services are taking a hammering as consumers and tourists stay at home. We could be in line for a “U” or even an “L”-shaped denouement.
The world economy will probably stall this quarter because of the outbreak, says Simon MacAdam of Capital Economics. That will end a 43-quarter streak of growth and will cost the global economy $280bn in lost output. Yet provided the virus is contained soon, that number should be made up for in subsequent quarters. This epidemic “will probably end up just delaying the global economic recovery in 2020, rather than cancelling it altogether”.
The bull charges on
“Trade wars, Middle East turmoil and now the coronavirus” – it seems that “nothing is capable of dislodging America’s long bull market, now in its 12th year,” says Jeremy Warner in The Sunday Telegraph. That long run comes despite the fact that valuations are sky-high. The S&P 500’s cyclically adjusted price/earnings ratio (Cape) is now higher than it was before the 1929 Wall Street crash. We are “very obviously in bubble territory”.
The latest market bounce back follows a familiar pattern, says Neil Shearing of Capital Economics. A growth shock is quickly followed by the conclusion that easy money from central banks will “put a floor under risky assets”.
The risk, of course, is that low interest rates may pump up a dangerous financial bubble somewhere. US corporate credit and Chinese property are the most likely candidates to bring the party to an abrupt and destabilising end.
-
House prices are falling in London but how does it compare to the rest of the UK?Advice The capital remains the most expensive part of the UK to buy a property, but it isn’t being as badly hit by the housing market slump. Where are London house prices heading?
-
Will a Santa Rally provide festive cheer for investors this year?
News Equities often get a seasonal boost during December - will there be a Santa Rally in 2023?
-
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
