Email of the day on the coronavirus:
Comment of the Day

February 07 2020

Commentary by Eoin Treacy

Email of the day on the coronavirus:

You will have plenty to read on this subject. But this does scare me:

Chinese financial shock gathers steam as world holds its breath on coronavirus

A major slowdown in China could trigger recession and defaults in other parts of the world

By Ambrose Evans-Pritchard

Eoin Treacy's view

Thank you for this article which highlights the acute risk to market, particularly in Europe, which rely on Chinese demand. That is as true of the automotive sector as it is of luxury goods. Here is a section:

The disturbing feature is that the European Central Bank’s emergency rate cut and renewed quantitative easing in September have gained so little traction. While it was not literally the ECB’s ‘last throw of the dice’ there is precious little left to play with.

There must now be a serious risk that China’s coronavirus crisis - if prolonged - will push Germany, Italy, and perhaps France into a technical recession, and in so doing expose both the ECB’s credible limits and the eurozone inability to launch meaningful fiscal stimulus under its deflationary ideology and spending laws.

Markets have not yet looked so many moves ahead on the global financial chess board but they might do so within two or three weeks if the corona fever is not broken, and traders tend to shoot first and ask questions later once fear takes hold.

Everything depends on the spread rate and the doubling rate, 2.68 per case and 6.4 days respectively, according to a Lancet study last week. If these figures improve markedly (and can be believed), the storm should blow over. If they do not materially change, the global recessionary dynamic may become unstoppable within weeks.

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