North American markets sold off heavily on Friday to give up gains for January. After shrugging off the coronavirus just days earlier, U.S. investors in particular finally woke up to the full impact of the outbreak. China could lose US$62 billion in economic activity this quarter, which would reverberate around the world. In short, China will cocoon buy less of everything from other countries, from raw materials (i.e. copper and oil) to consumer goods (e.g. running shoes and designer handbags) until authorities contain the disease’s spread and–hopefully–some biotech produces a vaccine to stop it.
Notably, Friday’s sell-off gathered intensity throughout the session with the three major New York indices, closing down 1.59-2.09%. The VIX spiked nearly 22%. It didn’t help that large caps like Chevron and Exxon reported earnings misses; they plunged over 4%. In fact, Exxon fell to lows last seen in September 2010.
As in past days, the TSX declined a little less, closing down 1.11%. Only the materials sector enjoyed a gain, up 0.43%, while the rest closed negative with energy plunging the most to 3.5% along with crude, which fell 1.5%. Gold and silver were up, but only modestly. Even defensives like telcos and REITs (BCE and CAP REIT were both down around 0.5%) weren’t spared, while utilities barely edged up. Chinese PMI data yesterday met expectations, but did not reflect the full extent of the outbreak. (The virus has even overshadowed Brexit. The UK left the E.U. on Jan. 31, 11 pm London time.) Stay tuned as Stockchase follows this outbreak.