Market waking up to coronavirus impact

Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

“While the number of new cases of coronavirus continues to slow in China, the spread outside the country is escalating and it seems the market is waking up to the impact on both individual companies and the wider economy,” says Russ Mould, Investment Director at AJ Bell.

“Profit warnings linked to the health crisis, as companies are either hit by slowing consumer demand in China or impact on their supply chain, are starting to trickle out with the impact on iPhone sales revealed by Apple earlier this week the most high profile of these.

“The warnings are also a reminder that the SARS outbreak in 2003 is not necessarily a good point of comparison with events in 2020, given China is now a larger economy with closer links to the rest of the world.

“The travel sector could really bear the brunt of the coronavirus impact, as people stay at home rather than taking on a perceived greater risk of infection by going on holiday, with industry body the International Air Transport Association forecasting demand for air travel will fall for the first time since 2009.

“The FTSE 100 took its cue from weakness in the US and Asia overnight, falling towards 7,400 at the open. Luxury fashion business Burberry, which has significant exposure to Chinese shoppers, led the downward move.

“Commodity prices, which have typically been ahead of equities in factoring in the economic impact implied by coronavirus, were also weak. Gold was the exception, its multi-year highs reflecting its safe haven appeal to investors.

“Elsewhere publishing firm Pearson was under pressure as full year results had a Groundhog Day quality to them, the company once again hit by falling sales of academic textbooks in the US."

These articles are for information purposes only and are not a personal recommendation or advice.