THURSDAY, March 28, 2024
nationthailand

Dow rebounds 300 points as coronavirus fears send Chinese markets plunging

Dow rebounds 300 points as coronavirus fears send Chinese markets plunging

Coronavirus wreaked havoc on Chinese markets amid rising concerns about the government's ability to contain the crisis before it exacts lasting damage on the global economy. And while the Dow Jones industrial average rebounded from Friday's 603-point rout, the outbreak is already beginning to cut off American companies from their supply of Chinese-made parts and materials.

Chinese stocks dropped sharply Monday as coronavirus infections on the mainland surged past 17,200, extending a sell-off that wracked Wall Street last week. The benchmark Shanghai Composite Index fell more than 8 percent on the first trading day after the Lunar New Year holiday, its steepest one-day decline in four years.

The outbreak has only intensified ever since Chinese markets were last open on Jan. 23. Many nonessential Chinese businesses have shut down, tourism has disappeared and consumer spending has plummeted.

U.S. markets roared back Monday, with the Dow Jones industrial average up 300 points. The Standard & Poor's 500 and Nasdaq composite were both up 1 percent. 

Those gains stood in stark contrast to Friday, when the Dow plunged 2 percent, wiping out January's gains, while the S&P 500 and Nasdaq composite fell 1.77 and 1.59 percent, respectively. The declines came as the World Health Organization declared a public health emergency, and Delta Air Lines and American Airlines joined other major carriers in suspending all service to China.

Saudi Arabia is pressing for a major oil production cut as coronavirus threatens crude demand, the Wall Street Journal reported on Monday. Representatives from the Organization of the Petroleum Exporting Countries, or OPEC, and its allies will meet this week to discuss options in the wake of the outbreak, which prompted the largest monthly crude-price drop in 30 years. China is also the world's leading oil consumer.

Analysts also are closely watching the outbreak's toll outside of China.

"[Over the weekend] there were signs the outbreak is slower outside of Hubei, and there have not been any major international outbreaks," analysts at Cowen wrote on Monday. "However, new outbreaks often come in waves, and the numbers could also worsen going forward."

European indexes were in the green Monday.

Before the outbreak, which has spread to 23 countries outside China, economists had expected global manufacturing to pick up at the beginning of 2020, in part due to the recent trade deal between Washington and Beijing.

But the outbreak is already sending spirals through the supply chains of American companies that rely on China for parts and materials. From consumer electronics to automobiles to medications, China is a major economic engine where production could grind to a halt until the public health crisis is under control.

So far, the White House has downplayed the threat. President Donald Trump's top economic aide, Larry Kudlow, said last week that he expects the virus to have "no material impact" on the U.S. economy.

On Sunday, China's central bank said it would inject 1.2 trillion yuan - roughly $173 billion - worth of liquidity into the markets. The Chinese yuan fell below 7 to a dollar, while commodity prices traded in Shanghai also fell sharply.

Many economic analyses point to the limited repercussions of the 2003 SARS epidemic. At the time, the Chinese economy bounced back relatively quickly when consumer spending returned to normal and businesses reopened. But China's $14 trillion economy is four times as large as it was then and much more entrenched in global trade.

About 150 million Chinese business executives and tourists took an international flight in 2018, the most recent data available, more than seven times the 2003 figure, according to JPMorgan. Globally, the number of shipping containers moving among the world's ports has almost tripled, according to the United Nations.

 

 

 

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