News that a mysterious respiratory virus in China has infected medical workers, a sign that the virus has entered a new phase wherein it spreads from person to person, rocked Asian financial markets today. The death toll has climbed to six and China today raised the number of confirmed cases to 291.
The outbreak is reminiscent of the severe acute respiratory syndrome, or SARS, pandemic that killed 800 people in Asia 17 years ago. Signs that the virus is now spreading from person to person came as hundreds of millions of Chinese prepared to travel across the country and globally for the Lunar New Year holidays. CNN today reported that the respiratory virus has appeared in the United States.
Like SARS, this new virus belongs to the coronavirus family and looks to have initially begun among individuals who came in contact with infected animals in crowded “wet” markets in the Chinese city of Wuhan. (Wuhan has a population of 11 million.) The good news is that, so far, the new virus seems less deadly than SARS, producing only a mild illness in the vast majority of people that have been infected. Only 10% of cases have resulted in the patient reaching a critical condition with the greatest danger to elderly people with an existing disease. SARS wound up killing people of all ages. (Coronavirus are a large family that includes viruses that cause illness in people and others that infect cats, bats, and other animals.)
The SARS pandemic became so deadly because Chinese authorities initially tried to cover up the outbreak, thus allowing the virus to spread further before health workers tackled the outbreak. This time, though, Chinese health agencies have been reporting the spread of the virus publicly since the initial detection of the outbreak.
Right now, in my opinion, markets are reacting to memories of the SARS outbreak rather than to this new virus itself. Hardest hit have been Asian markets in countries, such as Singapore, and regions, such as Hong Kong, with large Chinese populations that are likely to be on the move for the Lunar New Year holiday. Investors also look like they’ve decided that protecting profits from a record stock market run makes sense even on these memories and have moved cash to safe havens such as U.S. Treasuries.
The Standard & Poor’s 500 index was down 0.25% as of 1:45 p.m. New York time today and the Dow Jones Industrial Average had slid 0.34%. The NASDAQ Composite was lower by 0.29% and the Russell 2000 small cap index had tumbled 1.11%. The iShares MSCI Emerging Markets ETF had moved down by 2.26%.
The yield on the 10-year U.S. Treasury moved lower by 5 basis points to 1.77% as prices moved up. (The yield was 1.81% on January 16.) The yield on the two-year Treasury fell to 1.53%. (The yield was 1.57% on January 16.)
The dollar fell with the Dollar Spot Index down 0.07%. Gold was off 0.10% to $1558.70 an ounce and silver dropped by 1.37% to $17.83 a ounce.