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Coronavrius Update: Virus Spread Continues



Risk assets attempted a meek recovery overnight, only to sell off again in the European morning, as the number of confirmed cases of coronavirus continued to tick higher in Europe and South Korea.


Cases in Italy have risen to 270, with the virus spreading to more regions across the country. Unfortunately, this implies that the decision of Italian authorities to quickly quarantine the worst-hit areas has failed to fully contain the spread of the virus.


The virus also appears to have spread to a number of countries with close transport links with Italy. An Italian tourist was confirmed to have the virus in Tenerife, leading to the quarantine of him and the hotels other 1000 guests. First cases have been confirmed in Croatia, Switzerland, Austria and the Catalonia region of Spain. How long till the virus again reaches France and Germany?


The number of South Korean cases again increased by more than 100 yesterday, with the total number of confirmed infections nearing 1000.


The numbers in Japan are also rising. Japan now has 160 cases of the virus, while it is also harboring the quarantined Diamond Princess cruise ship, which has a total of 691 cases.


Looking ahead, the coronavirus playbook is going to relatively simple. Either the rate at which the number of new international cases starts to fall, in which case risk assets would rebound. Conversely, the rate of spread could continue to increase (unfortunately, this is my base case assumption), in which case recent downside seen in risk assets will continue.


* Note: Since recording the video, a wave of risk-off has hit markets. Likely, they are probably pricing in a higher probability of the worse of the two scenarios I laid out; that the pace of virus spread picks up internationally.

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