Global Stock Markets take A Nosedive amid death toll of Coronavirus crossing 80

Headline: World indices took a nosedive on Monday (January 27, 2020), traded significantly lower amid escalating concerns over the acuteness and deadly impacts of coronavirus to speedy fanout across China and to 10 other countries. The deadly impact of coronavirus prompted substantial sell-off in the major financial markets. Apart from China, the virus has now reached in some countries of Asia, Europe and the United States.

With the United States major, the S&P 500 index plummeted approximately 52 points or 1.57% to 3,243.63, the stock price-weighted Dow Jones Industrial Average Index slumped about 454 points or 1.6% to 28,671.79 and the technology dominated Nasdaq Composite Index plunged 175.6 points or 1.89% to 9,139.31.

However, Chinese and most Asian markets were closed because of Lunar new year holiday; however, Hang Sang, Nikkei and other Asian markets fell substantially on Monday.

Recently, U.S. broader indices had registered their all-time highs, but with Chinese virus spread out in more than 10 countries with 81 people now dead and thousands of people got getting infected according to data released on Monday morning, the benchmark indices are roughly two and a half percentage points down from previous highs.

Stock markets in Europe also registered their highest one-day fall on Monday, with the U.K. market major FTSE 100, which gauges movement in U.K.'s large-cap international stocks, sliding down 173.93 points or 2.29% to 7,412.05. Germany's DAX slumped approximately 372 points or 2.74% to 13,204.77, France's CAC 40 plunged approximately 161.23 points or 2.68% to 5,863.02, and Netherland's AEX plunged about 15.55 points or 2.53% to 598.69.

However, China’s stock market extended losses on Tuesday and its major bourse Shanghai Composite traded around 85 points or 2.75% lower at 2,976.52 (as on Tuesday, January 28, 2020, at 08: 00 AM GMT); Australian market also followed the prevailing trend in Asian market, with the S&P/ASX 200 Index giving up more approximately 96 points or 1.35% and ended the day’s session (January 28, 2020) at 6,994.50.

The early trend in the Asian and Australian markets suggest that markets in Europe and America would open in red and extend the trend of the previous trading session as on January 28, 2020, as well.

Sectors hit hard

There were several specific counters which were hard hit amid increasing concerns over financial distress because of the catastrophe spreading over. The Airline stocks witnessed the steep one day plunge, with U.K.'s Airline major, International Consolidated Airlines Group S.A. (LON:IAG) plunging 34 points or 5.48% to GBX 587.0, EasyJet PLC (LON: EZJ) fell off approximately 4.92% to GBX 1,409.50 Travel and Tourism company, TUI AG (LON:TUI) slumped more than 2.0% to GBX 820.60 against the previous close of GBX 838.0, Carnival PLC (LON:CCL) ended approximately 5% lower at GBX 3,257.0, as coronavirus is set to significantly dent the Chinese tourism sector during the time of lunar new year. However, stocks of restaurants, bars and pubs and casino stocks also took a plunge yesterday. Stocks of restaurant and bars group Whitbread PLC (LON:WTB) declined 1.5% to GBX 4,239.0, PPHE Hotel Group Ltd (LON:PPH) traded 2.9% lower at GBX 2,040.0, and Restaurant Group PLC (LON:RTN) slumped 1.64% to GBX 131.90, as a decline in tourism and airline business will directly hit businesses of hotel, restaurants, pubs and bars, straight away.

Apart from these above-mentioned companies and sectors, every broader sector in the FTSE 100 index ended Monday’s trading session in the red and there was steep sell-off across the board. Also, the mid-cap gauge, the FTSE 250 index, which gauges movement the top 250 medium-sized companies, plummeted more than 400 points or 2.0% to 21,303.67.

How needle moving in European markets as on Tuesday (January 28, 2020)

During the early trading hours, the European market traded in mix, with the U.K. major FTSE 100 index trading 0.03% higher at 7,418.02, the FTSE 250 index trading 0.07% lower at 21,287.92, Germany's DAX was trading 0.07% higher at 13,211.28, France’s CAC 40 increased 0.14% to 5,871.13 while Netherland’s AEX traded 0.02% lower at 598.58, respectively.

However, despite a steep plunge in a day before session, broadly the European markets failed to pare losses accumulated on Monday, as during early trading hours trends were mixed and no indication of any specific trend in the indices.

What experts are saying

Peter Garnry| Head of Equity Strategy at Saxo Bank said that Equities are finally beginning to contemplate the possibility that the spread of coronavirus in China will have a significant economic impact as the lockdown is now affecting 56 million people.

Stephan Lueck| Senior vice president, European equity sales at Auerbach Grayson said that, With the market looking to turn into profits, what will probably be seen until everything clears is a move from the risk-on type of holdings to more value-focused holdings and relying more on companies that pay decent dividends and are more domestically focused.

Brad McMillan| Chief investment officer for Commonwealth Financial Network said that,

However, several public health experts stated that the number of deaths took place because of coronavirus spread in China is far higher than what official numbers have been reported so far. And, the impact of virus spread across China would slow down Chinese economic growth and many believe that China's present estimated growth rate of 5.9% would be dragged down by 0.5-1.0% in total; however, S&P Global claimed that this catastrophe could drag economic growth in China by 1.2%.

However, we believe that the Tour and Travel sector will remain under pain for an extended period, till the time Chinese officials report any measures that would curb the widely explored disease.

Also, as Asian stocks majorly traded in the red, with European markets traded in a mixed fashion; we believe markets in the United States would open in red and could extend losses of the previous trading session.

However, in every vast market sell-off there are pockets which outperform the broader indices; investors should keep an eye on those counters rather than betting against the prevailing trend, which could turn out be a losing bet.

Happy Investing!