Daily Markets: Coronavirus Escalation Forces Companies To React

Daily Markets: Coronavirus Escalation Forces Companies To React

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 (AALand 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…

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About the Author

Lenore Hawkins & Chris Versace
Lenore Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, strategic planning, risk management, asset valuation and operations optimization, her focus is primarily on macroeconomic influences and identification of those long-term themes that create investing headwinds or tailwinds. Chris Versace is Tematica's Chief Investment Officer and editor of Tematica Investing newsletter. All of that capitalizes on his near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks.

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