US President Donald Trump did his best to talk up stocks.
Trump said the coronavirus is ‘a problem that’s going to go away’. And that the stock market is ‘starting to look very good’.
In early trading US markets looked like they might take heed. Until the US Center for Disease Control and Prevention (CDC) threw cold water on Trump’s reassurances.
The director of the CDC’s National Center for Immunization and Respiratory Diseases, Nancy Messonnier, didn’t mince words:
‘We expect we will see community spread in this country… It’s not so much a question of if this will happen anymore, but rather more a question of exactly when this will happen and how many people in this country will have severe illness.’
And if investors needed more reasons to panic, they only had to tune into the news coming out of Europe and Iran.
Italy confirmed 322 cases of the virus and 11 deaths. And it’s spreading across the continent, with cases now confirmed in Croatia, Switzerland and Austria.
Then there’s Iran, with 15 deaths and 95 confirmed cases. But the true number is likely 10 times higher.
According to The Australian deputy health minister Iraj Harirchi ‘warned there were as many as 900 suspected people infected with the virus before confirming his own diagnosis.’
Harirchi himself tested positive for COVID-19. That came shortly after a TV interview where he claimed the government had everything under control.
By the time the smoke cleared from these bombshell revelations the US S&P 500 closed down 3.0%. That brings the index’s losses to 7.3% since last Thursday’s close.
The Dow Jones Industrial Average closed down 3.2%. And here in Australia the ASX 200 closed down 1.6%. With more heavy selling underway today.
So have investors lost their once unshakeable faith that central banks will do whatever it takes to prop up share prices?
For that answer we turn to our The Rum Rebellion editor, Greg Canavan:
‘This time, central bankers can’t avert a cyclical slowdown. They will try, but the impact on earnings from this virus fear will be real and perhaps much larger than expected.’
That could see a lot more pain ahead for Aussie stocks.
And it could put more pressure on an already flagging Aussie dollar.