Coronavirus at the heart of Europe

It has been a crazy day in the financial markets. All of them were deeply in the red. The coronavirus outbreak in Italy is a little bit the straw that broke the camel’s back. Northern Italy is a wealthy region. It is very well connected to the heart of Europe. And that has generated some serious panic. Now, the response must be the opposite. To keep everyone, calm. To show that we have the means to circumscribe the outbreak. It is not an easy task. But that’s the role we expect the political authorities to play. So far, the Italians and their neighbours are playing the appropriate cards. Let’s hope they will keep doing it. If any of them decides to restrict the border crossings that will send a very negative signal to the public opinion.

Lots of billions lost to flu

Today, we are challenged again to reflect about resources, availability of wealth and how vast amounts of money can be spent wisely or just evaporate. It is also a call to reflect about priorities, decide on the appropriate ones and how to fund them. More concretely, all this is about uncertainty and its impact on capital markets, on short-term decisions and, in the end, on the minds of people.

Today’s uncertainty is about the coronavirus.

More concretely, almost every stock in the STOXX 600, the largest European share index, are trading since this morning in negative territory, in the red, as the specialists say. This represents around 180 billion euros the investors have lost during the day, just today. This is about 2% of the entire capital invested in those companies. But it is a lot of money that has faded away.

The investors are pessimistic about the impact of the virus and the capacity to control its transmission. A friend from the East Asia region told me that, in the current state of world affairs, “when China sneezes, the rest of the world catches the flu virus!” It is not exactly like that. But for sure the Europeans that negotiate in the capital markets got high fever today.