Rabobank: “Imagine London In Full Lockdown”
Imagine London in full lockdown. Hard? Well, Chinese authorities just decided to issue a Wuhan travel ban, locking down a city with more inhabitants than London. Stopping the spread of the new SARS-like corona virus is the aim, as more and more cases of contagion have been reported, for which the majority are pointing at Wuhan being the place of origination. The WHO delayed its decision on whether to brand the situation as an a public health emergency of international concern and is expected to report on its deliberations today. Meanwhile, China reported 8 new deaths from the Corona virus, bringing the worldwide tally to 17.
Whilst broader risk-off sentiment in financial markets seemed slightly less intense than on Tuesday, Asian stocks took a significant beating overnight, with the Chinese CSI index dropping more than 3% as losses mounted during the trading session. Concerns that travel bans will be rolled out more widely are giving investors jitters, even though these bans are intended to prevent the situation from spiralling out of control.
Meanwhile, the stepping-down of Five Star movement leader Luigi di Maio, on which the market had been speculating already earlier this week, had relatively little impact on European bonds, with Italy’s spread volatile but even tightening slightly after the widening move yesterday. Italian minister Robert Gualtieri said di Maio’s resignation as leader would not affect his position as foreign affairs minister and would not affect the stability of the government. Apparently this was sufficient for market participants, who perhaps see this as an opportunity for the PD’s coalition partner to seek a new leader who can take on the potential threats from the rising popularity of Matteo Salvini’s League, who are expected to do well in the regional elections on Sunday.
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