The Tribune

The novel coronavirus first appeared in Wuhan sometime in December and, at the time of writing (February 19), there are over 70 million people infected worldwide, resulting in more than 2000 fatalities.

The emergence of the disease triggered an unprecedented move by the Chinese authorities, leading to the imposition of circulation restrictions over more than 70 million people and the prolongation of the lunar new year, triggering a pronounced decline in the country's economic activity.

Despite uncertainty about the real potential for disruption, over what will be the duration, global reach and severity of the disease, economists from Morgan Stanley are predicting a fall in economic growth to as low as 3.55% (from the previously estimated six percent) during the first quarter of 2020, if containment of the pathogen isn't achieved quickly - other scenarios, accounting for longer timeframes are even more pessimistic. A recent analysis of the manufacturing output in the country, by the same bank, found production to be below 50 percent of the usual level.

But the disruption isn't limited to China. The country is a pivotal piece in the global supply chain, providing parts and components used by manufacturers and assemblers based all around the globe; Apple recently stated the unlikeliness of its first quarter sales projections being achieved. JCB, a UK producer of heavy machinery, announced cuts in production and the introduction of a 34-hour week for its employees, due to a shortness of components imported from China.

However, China isn't only an exporter, it is also the world's largest buyer of raw materials, specially oil, and one of the main markets for European cars and luxury products. Global tourism is another casualty of the crisis, as the Chinese traveller stays at home.

And how are the financial markets reacting? Perhaps with some complacency; the S&P500, a stock index, which includes the main US companies, continues to rise; at the time of writing it had just reached an all-time high, in a dynamic reflected by the world's other leading stock indices.

Since the 2008 financial crisis central banks have been keeping interest rates at historical lows and injecting liquidity into the financial markets, driving investors towards a search for yield that has been particularly beneficial for stocks.

So far, the coronavirus hasn't changed this sentiment, which continues bullish. We can however see repercussions in the foreign exchange and commodities markets.

The Euro lost over 3.8% to the US dollar since the beginning of the year, due to fears that the slowdown in global economic activity will have a worsening effect over the already anaemic levels of growth in the region. The price of oil also suffered, due to the reduction in demand from china, leading to a decline of around 17% in the value of the crude barrel.

Much uncertainty persists over the coronavirus and its potential to impact the growth of the global economy. If it will it trigger a black swan event, that dictates the end of the longest running bull market in history, remains to be seen.