Despite a rough start yesterday, the major US equity indices managed to close little changed after the World Health Organization (WHO) calmed rising fears around the coronavirus coming out of China. The WHO’s declaration that coronavirus is not a global emergency helped travel stocks such as American Airlines (AAL) and United Airlines (UAL) rebound. In contrast to the WHO, however, yesterday the Centers for Disease Control and Prevention (CDC) escalated its health warning to a level 3.
Overnight things coronavirus continued to escalate and as we write today’s Daily Markets note, there are 875 confirmed cases with reported deaths now totaling 26, and all but two of China’s 31 provinces and municipalities reporting cases of the virus. In response, China has instituted travel restrictions that will affect at least 20 million people across 10 cities. The big concern here is how the outbreak will impact China’s Lunar New Year holiday season that spans Jan. 25- Feb. 8. The restricted travel is likely to hit consumer-related activity hard during the holiday season, and we are already starting to see companies such as Walt Disney (DIS) take action while others, like Remy Cointreau (REMYY) are warning over the potential impact to their business – we discuss both below. Until the virus is contained, we suspect the ranks of companies taking action and issues warnings will only grow in size as will the impact on China’s economy in the current quarter.
The Shanghai market was closed for the first day of the Lunar New Year festival…
- PepsiCo (PEP) and Walmart (WMT) are constituents in Tematica Research’s Thematic Dividend All-Stars Index.