We haven’t reached the bottom yet

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Good morning. David Meyer here in Berlin, filling in for Alan.

It would be nice to wake up to good news about the markets, but this apparently isn’t the week for that. After we plowed into correction territory yesterday, with stocks like Tesla’s getting hammered, the slide continued.

In Asia today, the Hang Seng fell 2.4%, the Shanghai Composite and Nikkei 225 both dropped 3.7%, and the Kospi shed 3.3%. Similar story in Europe—the Stoxx Europe 600 was down 2.8% at the time of writing—and U.S. futures are very firmly in the red, too. Zooming out, the MSCI World Index is down more than 9% for the week. We haven’t been here since 2008.

Too much, too soon? Swissquote Bank senior analyst Ipek Ozkardeskaya thinks so, writing this morning: “To us, it appears that the market has gone ahead of itself and a rebound should be around the corner. The coronavirus outbreak has certainly hit businesses, and it might have a longer-than-expected negative impact on company earnings and global growth. Yet the extension of the sell-off we are seeing may be a bit too dramatic, even compared with the significant downshift in valuations.”

Maybe, maybe not. There’s some good news in China, where the number of new infections is falling (Hubei province continues to bear the brunt of the outbreak there). But elsewhere, not so much.

South Korea’s infection count has cleared 2,300, and Italy’s is now over 650—the only western European countries without a confirmed case are Portugal and Ireland. Around 1,000 people in the German town of Heinsberg are under quarantine, and the Geneva Motor Show has been cancelled after Swiss authorities banned large gatherings. Sub-Saharan Africa also now has its first case (an Italian citizen who works in Nigeria), which is particularly worrisome given the relatively poor state of medical care in the region. Middle Eastern countries such as Israel and Saudi Arabia are closing their borders to people coming from countries with confirmed cases.

The powerful are not immune: Iranian Vice-President Masoumeh Ebtekar has been confirmed ill just after meeting with President Rouhani and other cabinet members, and Mongolian President Battulga Khaltmaa has been placed in precautionary quarantine after visiting China on a state visit.

The markets also seem to have absorbed the fact that, while drugmakers are scrambling to create a coronavirus vaccine, it won’t be hitting shelves until (best-case scenario) at least a year from now, due to the need for safety and efficacy trials. An effective treatment—perhaps Gilead’s remdesivir—may become available sooner, but a vaccine will only theoretically be of use if Covid-19 becomes like the flu: something that rolls around each year, that we all have to deal with again and again.

In the meantime . . . hey, at least hand-sanitizer merchants like Bath & Body Works are doing well. As well they should. Wash your hands regularly, folks.

More news below.

David Meyer

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