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Coronavirus Surprises Keep Getting Nastier, Costlier

Coronavirus Surprises Keep Getting Nastier, Costlier

Wednesday, 26 February, 2020 - 06:30

Just a couple of weeks ago, this newsletter said that the coronavirus kept finding ways to surprise and that markets weren’t taking it seriously enough. Well, surprise! They’re taking it seriously now.

Stocks fell a whole bunch this week, with the Dow clocking a rare thousand-point loss, partly on news Covid-19 is spreading too quickly for comfort in Italy and elsewhere. It seems efforts to contain the virus have failed, and we could just be seeing the tip of the iceberg, writes David Fickling. This keeps edging toward becoming a global pandemic. 

Italy’s cases are especially worrisome, as their origin isn’t exactly clear, writes Ferdinando Giugliano. It’s possible the disease was spreading undetected for weeks before we noticed — not great for pandemic-avoidance. The illness hasn’t really come to the US yet, as far as we know. But it’s never too soon to get our chronically underfunded health-care system ready, writes Max Nisen. That will involve spending more money, for starters, particularly on diagnostic testing.

Last week, markets were kind of bopping along on hopes China and various central banks would offer enough stimulus to offset whatever disruption the virus caused, writes Clara Ferreira Marques. They also seemed to expect a quick rebound of global commerce, rather than a prolonged illness. Markets might be starting to sort of back away from such foolish views now.

This would also be a good time for economic policy makers in Europe and elsewhere to awaken, have a stretch and maybe take some action, writes Ferdinando Giugliano. Even before the virus hit, Germany was adamantly not spending despite an economy in the doldrums, while the ECB was bizarrely optimistic. Coronavirus should change that. The Fed has been a little more cautious, but Narayana Kocherlakota argues it should do an emergency rate cut right now, of 25 or 50 basis points, to get ahead of any trouble. That would be one of those, whattyacallit, “good” surprises, which have been rare lately.


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