The Coronavirus Is Beginning to Rattle Stock Markets

The Coronavirus Is Beginning to Rattle Stock Markets

The market doesn’t like news it can’t assess, does it?

I mean, negative yielding debt is sitting at around $18.3 trillion…

That means that there are bond holders around the world that are guaranteed to return less than their initial investment at maturity.1

But no, this phenomenon running in the background for over two years hasn’t bothered investors one bit.

Then you get one virus that has been around several weeks and suddenly the stock market is shaking…

The Coronavirus and the Stock Market

European stocks fell 2% overnight.

Major indices in the US were down on average 1.5% yesterday.

And the Aussie market was down 1.7% at the open this morning.

It appears the coronavirus is beginning to rattle markets.

International shares in airlines and luxury goods are taking the hit for now.  Aussie commodity stocks may see an unjustified panic sell-off too.

That’s partly because it’s still too soon to judge the global economic impact of the coronavirus.

Which may be a direct result of the murkiness surrounding just how ‘controlled’ the spread of the virus has been.

As of this morning there were more than 2,500 confirmed cases of the coronavirus in China. With 81 people dead.2

Yet only a couple of weeks ago China authorities were being praised for their handling of the virus.

What went wrong?

The first official diagnosis of the coronavirus was announced on 30 December, with the World Health Organization (WHO) notified the next day.

The rapid response from the Chinese government comes from the SARS virus in 2003 — it took three months before China notified WHO of the disease.

Making China’s official response this time around impressive…

…however at a local level many steps were taken to hide the deadly illness.

And for over a month China reported no new patients, yet the virus was spreading around the world…

A mysterious 39 days

There are suggestions that the first outbreak of the disease was noted on 12 December. Almost three weeks before the ‘official’ diagnosis.

As The Age wrote this morning:

Yet hospitals were told to report ‘zero infections’ among staff, according to multiple sources. Sick people were turned away from hospitals untreated, including one woman who went home and died.

The only response from the authorities was to follow up with an urgent cremation, conducted in secret, by a team wearing full hazard suits.3

Furthermore the article points out that even though coronavirus was observed in mid-December, there were no reported cases between 12 December and 21 January.

A whole 39 days where the disease magically didn’t exist.

Yet as local governments in China ignored the presence of this virus during that time, cases of the coronavirus were reported in places like Thailand, the US, and Japan.

Apparently, the cover up can be attributed to the annual meetings Wuhan was hosting during 7–17 January.

Obviously the government didn’t want to scare off the folks travelling into the area on official business…

The point is, people employed in local government and positions of power in Wuhan actively took steps to hide this deadly disease.

And even once the WHO was formally notified of a highly contagious viral infection, there’s an entire blank period where there just happens to be no new cases in China — even though we know the virus was spreading globally.

As Jim points out today, China has a solid track record of lying to the markets.

Everything from fudging figures about economic growth through to making promises it has no intention of keeping.

Meaning, them masking the true problem of the coronavirus shouldn’t come as a surprise to investors.

Read on for more.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia


China — a World-Class
Economic Liar

Jim Rickards

Beginning in 1992, in the aftermath of the Tiananmen Square massacre in 1989, the US, under the influence of globalist philosophy and led by the Clinton and Bush clans, decided that China needed to be welcomed into the club of nations.

China’s physical size and one billion-plus citizens made it impossible to ignore. Yet, its communist leadership made it a threat to Western values.

The globalist solution was to help convert China to capitalism.

It was recognised that this process would take decades, but the payoff could be huge if China gradually converted from communism to capitalism and began to be ‘just like us’.

The globalists poured direct foreign investment into China.

We bought Chinese goods by the billions of dollars.

China was welcomed into the World Trade Organization (WTO) in 2001, the IMFs SDR currency basket in 2016, and other multilateral institutions.

China’s growth was enormous and the globalists’ plan seemed to be working fine.

But, it was all an illusion.

China promised to reduce subsidies to its companies under WTO rules, but they lied.

They promised to maintain and open capital account under the IMF rules, but they lied.

In fact, China has lied and reneged on every promise of openness and responsible behaviour they have ever made.

Long history of broken promises

Today, the globalist’s fantasy outcome for China lies in ruins.

China is shown to be the same aesthetic, totalitarian, brutal society it has been since 1949.

This is revealed in its organ harvesting program (from still living dissidents), suppression of religious groups, and widespread use of concentration camps.

China has just signed a new trade deal with the US.

There’s no reason to believe that the promise made in that trade deal will be honoured any more than all of the other broken promises.

At least Trump has left tariffs on US$250 billion of Chinese imports in place and can add more if China does not live up to the deal.

Two weeks ago the Washington Times reported that China is on trial for breaking other promises before the ink is even dry on the new trade deal, writing:

A federal court case involving three Chinese banks is raising questions about Beijing’s commitment to abide by agreements with the United States — a day before President Trump is scheduled to sign the first major trade deal of his administration with China.

A senior Justice Department official said China has failed to observe terms of the 2001 Mutual Legal Assistance Agreement, and a federal judge ruled recently that seeking legal help from China under the accord has proved fruitless.

[…]

China has used the agreement to block two investigations of Chinese financial assistance to North Korea in violation of US sanctions on Pyongyang.4

China has refused to provide information concerning efforts of its banks to evade sanctions on North Korea.

China may be a world-class economic liar, but at least they’re consistent.

All the best,

Jim Rickards Signature

Jim Rickards,
Strategist, The Daily Reckoning Australia

PS: How Exposed Are You to an Aussie Recession?…and three steps to ‘recession-proofing’ your wealth. Download your free report now.

1 ‘https://www.afr.com/markets/debt-markets/worlds-pile-of-negative-debt-surges-by-the-most-since-2016-20200128-p53v97’
2 ‘https://www.ft.com/content/11e019c2-fbdb-3c50-a7fe-d15cec8648c7’
3 ‘https://www.theage.com.au/national/hartcher-20200127-p53v1c.html’
4 ‘https://www.washingtontimes.com/news/2020/jan/13/china-bank-case-heightens-doubts-about-beijing-tra/’