Market Update

Global equity markets experienced a decline this week amid concerns that China's coronavirus outbreak could escalate into a global pandemic, posing a threat to global growth.
Drawing parallels with past epidemics like SARS in 2003 and MERS in 2012 is challenging due to different global circumstances during those periods. However, this time, China constitutes a more significant portion of the world economy. Consequently, any economic slowdown in China is anticipated to have a more substantial impact on the global economy, leading to increased market volatility until the virus is contained.
The impact of the virus extended to commodities, especially in China, a major buyer. For instance, the price of a barrel of Brent crude dropped by 7% to nearly $60, despite supply disruptions in Libya and Iraq. Consequently, major UK equities like BP, Shell, BHP, Glencore, and Rio Tinto faced declines.
Luxury goods and leisure companies, including Burberry, Carnival, IAG, and TUI, also suffered losses due to concerns that the outbreak might disrupt travel and consumer spending. Chinese authorities' decision to restrict travel in and out of several cities exacerbated these fears.
In the UK, recent employment data indicated positive growth, with 208,000 jobs added in the three months to the end of November, surpassing expectations. Despite these encouraging figures, there are concerns that the strong job market hasn't translated into increased consumer spending or inflation, emphasizing the need for the Bank of England to consider interest rate cuts.
On the global political front, Luigi Di Maio's resignation as leader of Italy's Five Star Movement party created uncertainties, potentially affecting the Italian coalition government. A victory for Matteo Salvini's League party in regional elections could further strain the coalition, potentially leading to a snap national election.
Looking ahead, the financial world is watching closely as the Bank of England's decision on UK interest rates looms, although the outcome remains uncertain. Additionally, there's anticipation for the Federal Reserve's monetary policy meeting, although no change is expected in US interest rates. Economic indicators to be released include US durable goods, new home sales, Q4 GDP, PCE Core Deflator; Eurozone Q4 GDP, CPI; and Japanese retail sales, industrial production, and unemployment.
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