Coronavirus begins to affect global stock markets

Heartwood Investment Management, a subsidiary of Handelsbanken, has suggested the spread of coronavirus has begun to affect stock markets after a surge in cases in Europe. 

The virus has already begun to affect supply chains in the UK due to factory closures in China, however the rise in the number of cases outside of China has caused global stock markets to fall sharply, following surges in coronavirus cases in South Korea, Iran, Japan and most notably in Italy and Tenerife.

However, Heartwood Investments believe that the hit to economic data will not trigger a recession, although things may get worse before they get better.  At the epicentre of the outbreak in central China, the rate of the virus escalation has begun to moderate suggesting the containment process has been effective in mitigating the spread of coronavirus. Restrictions of factory openings has been lifted and the Chinese government are offsetting shocks to demand and supply through policy stimulus, such as keeping the availability of credit flowing and competitive.

Despite poor performance of global stock markets in recent days, Heartwood Investment Management do not believe the coronavirus outbreak will have a significant lasting impact on the global economy.  In their market update, the investment management firm stated:

Our view remains that the global economy is in a recovery phase and that global growth will start to improve during the course of the second half of the year as the economic impact of the virus recedes. We believe the current volatility in stock markets is transitory, and that liquidity and other supportive central bank measures will act as a stabilising mechanism first for capital markets, and later for economic growth.”

As a result of the outbreak in Northern Italy, a number of schools across the UK, including 3 in Cheshire have closed or sent children home after fears students may have come into contact with the virus following half-term ski trips in the Italian Alps.