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James Hyerczyk

The major Asia-Pacific stock indexes plunged on Thursday, taken down by a steep sell-off in the U.S. equity futures markets. The selling began when the World Health Organization (WHO) declared the coronavirus outbreak a global pandemic.

It accelerated to the downside when U.S. President Trump failed to instill confidence in investors. His address to announce measures to tackle the coronavirus outbreak was basically reduced to a ban on travelers to the United States from Europe for the next 30 days that didn’t sit well with European leaders.

The big loser of the day was Japan’s stock market. It followed the Dow into bear market territory on Thursday.

On Thursday, Japan’s Nikkei 225 Index settled at 18559.63, down 856.43 or -4.41%. Hong Kong’s Hang Seng Index closed at 24285.23, down 946.38 or -3.75% and South Korea’s KOSPI Index finished at 1834.33, down 73.94 or -3.87%.

China’s Shanghai Index settled at 2923.49, down 45.03 or -1.52% and Australia’s S&P/ASX 200 Index finished at 5304.60, down 421.30 or -7.36%.

Keep It Simple:  COVID-19 is a Global Economic Nightmare

We’re not going to get into the health ramifications of the coronavirus outbreak. Psychologically, let’s just say fear is driving the price action. It is the brother of hope and greed, which we aren’t seeing at this time.

We did see a little hope this week when Trump pledged financial aid, but that disintegrated when he and Congress failed to deliver. Greed – well we may have seen that a month ago when U.S. stocks were hitting record highs while investors watched the virus spread outside of the United States. The greedy ones, however, have been paying the price since the virus hit the U.S.

So now we are left with fear to drive the price action. If you believe the real issue is a supply-side and demand-side disruption associated with the virus then you are going to continue to react with fear because no one knows when the virus will be contained, when a vaccine will be developed and whether monetary or fiscal stimulus will be enough to change investor sentiment. Furthermore, this fear is likely to tighten its grip as long as health authorities and government officials continue to provide disjointed efforts to stop the virus from spreading.

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Airline Stocks Steepen Losses after Trump Announces Travel Ban from Europe

U.S. President Donald Trump may have inadvertently triggered the latest round of selling in the global airline stocks when he announced a ban on travelers to the United States from Europe for the next 30 days. U.S. airline stocks are expected to plummet on Thursday. European airline stocks plunged and Asia-Pacific shares also took a hit because traders feel there may be an eventual global airline shutdown.

Shares of airlines in Asia Pacific plunged following Trump’s announcement, Australia’s Qantas Airways dropped 9.9% while Japan’s ANA Holdings fell 5.63% and Japan Airlines plummeted 7.03%. In South Korea, Korean Air Lines declined 4.62%. In afternoon trade, Hong-Kong-listed shares of China Southern Airlines fell 5.56% while Singapore’s Singapore Airlines shed 3.65%.

Australia Announces Stimulus Plan

Australia’s government said it would pump A$17.6 billion ($11.4 billion) into the economy to try to stop the coronavirus outbreak triggering a recession, as it weighed on extension of travel restrictions following a formal pandemic declaration.

The is the country’s first stimulus package since the 2008 global financial crisis, which helped Australia avert a recession then, illustrates the lengths the government will take to pare the economic impact of the outbreak.

Opinion:  This tactic may have worked during the financial crisis of 2008 – 2009, but it’s not going to work now. The last crisis dealt with home prices and credit freezes. This crisis is virus-driven, and money is not going to save the global economy from recession, but the announcement of a vaccine cure will.

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