Closed Coronavirus: Yum China warns outbreak could wipe out 2020 profits — as it happened

The booth of fast food restaurant company Yum China Holdings Inc. is seen at an investment and trade fair in Hefei, Anhui

A live blog from

The FT’s live coverage of the coronavirus outbreak will begin later on Wednesday. You can review all of Tuesday’s developments ‘as they happened’ here.

Good morning and welcome to the FT’s rolling coverage of the novel coronavirus outbreak.

As the disease continues to spread, US airlines United and American have have suspended flights to Hong Kong, in a blow to the Asian financial centre.

Chinese authorities, meanwhile, are coming under growing pressure over their handling of the virus, with one World Health Organisation expert breaking ranks to criticise the time it took for the country to initially report cases.

We will have the latest developments and reaction as we get them throughout the day, so follow along here.

News from overnight: China round-up

Naomi Rovnick writes:

China’s 31 provinces reported 3,887 new cases of coronavirus on Tuesday, according to the latest round-up by the China National Health Commission. The vast proportion of these were reported by Hubei province, which includes Wuhan, the centre of the outbreak.

This takes the total number of confirmed cases in China to 24,324, with 490 deaths.

The semi-autonomous regions of Hong Kong and Macau have confirmed 18 and 10 cases respectively, with one death so far in Hong Kong.

Despite the World Health Organization having publicly praised the government of Xi Jinping’s handling of the virus, senior WHO expert John Mackenzie has broken ranks and accused China of not reporting cases quickly enough in the early stages of the outbreak, the FT’s Primrose Riordan and Sue-Lin Wong report here.

US airlines suspend Hong Kong flights

Naomi Rovnick reports:

United Airlines said it will suspend services to the Asian financial centre, days after it also cut its mainland China flights. This came just after American Airlines announced a similar step.

Both American and United have halted their services to Hong Kong until February 20.

British carriers that have stopped flying to China, such as British Airways and Virgin, are still selling flights to Hong Kong.

The territory has reported 18 coronavirus cases and one death, which is a tiny fraction of the number of cases in mainland China. But United and American both cited a drop in demand for travel to Hong Kong for their decisions.

Tech supply chain risks set to rise

Chinese and Taiwanese suppliers to Apple are braced for severe labour shortages as travel restrictions keep workers in the home towns they returned to for the lunar new year holiday, our sister title, the Nikkei Asian Review, reported earlier.

“This is new to everyone…we have to deal with it with pain,” an iPhone supply chain executive told Nikkei.

The new year holiday is a peak travel period in China, with millions of workers leaving cities and manufacturing centres to see their families.

Meanwhile, some large Chinese commercial and industrial hubs, including the cities of Hangzhou and Wenzhou, have imposed curbs on people leaving their homes in attempts to control the spread of coronavirus.

Read more on the potential hit to the iPhone supply chain from the Nikkei Asian Review here.

Cruise ship off Japan hit by coronavirus outbreak

Naomi Rovnick reports:

Ten passengers on the Diamond Princess, a cruise ship moored off of Yokohama in Japan, have tested positive for coronavirus.

There are more than 3,700 passengers and crew on the vessel and all have been asked to self-quarantine in their cabins for a fortnight.

The infected passengers will be taken ashore by the Japanese coastguard and brought to local hospitals, Princess Cruises said in a statement.

Malaysian confirmed cases rise to 12

Stefania Palma reports from Singapore:

Malaysia has reported two new confirmed cases of coronavirus, taking the country’s total to 12. The individuals are both Malaysian nationals who were evacuated from Wuhan.

Malaysia on Tuesday repatriated 107 individuals from the Chinese city. They, together with 26 government officers who facilitated the evacuation, will all be quarantined for 14 days.

Cathay Pacific asks staff to take unpaid leave as demand plummets

Hong Kong’s flag carrier, Cathay Pacific Airways, has asked all of its staff to take three weeks of unpaid leave as the spread of coronavirus has sent demand for its flights spiralling downward.

The airline on Wednesday said it was “appealing to all employees to participate” in an unpaid leave programme between March and June, a day after it announced plans to cut the vast majority of its flights to the Chinese mainland.

“In view of the novel coronavirus outbreak and also significant drop in market demand, we just announced massive capacity cuts yesterday,” a Cathay spokesperson said. “Today, we are appealing to all employees to participate in the special leave scheme.”

On Tuesday, Cathay said it was cutting 90 per cent of its flights to mainland China and 30 per cent of its overall capacity.

“Preserving cash is the key to protecting our business,” the spokesperson said.

The leave programme will be voluntary and run between March 1 and June 30.

Hong Kong data shows 203 cases outside mainland China

Naomi Rovnick reports:

The Hong Kong government is publishing daily updates that show the number of coronavirus cases across mainland Chinese provinces and internationally.

The data show that while there are now 24,324 cases of the virus in mainland China, the global spread has been limited so far, with 203 confirmed cases.

Hubei province, where the outbreak started and where several cities are in lockdown, has just under 69 per cent of all Chinese confirmed cases, according to the Hong Kong data.

Singapore has the most confirmed cases of all countries outside China, at 24 thus far, despite being further from mainland China than Hong Kong, which had reported 18 as at 9am local time.

Hong Kong to quarantine travellers from mainland China for two weeks

Nicolle Liu reports from Hong Kong:

Hong Kong’s chief executive Carrie Lam said on Wednesday that the government will introduce a new regulation requiring anyone who has travelled from mainland China to Hong Kong to undergo compulsory quarantine for 14 days.

Announcing the new measures – which will take effect from midnight on February 8 – Ms Lam said none of three new confirmed cases on Tuesday had a travel record during the incubation period, suggesting “the epidemic has gone to another stage”.

She also announced the shutting down of the Ocean and Kai Tak Cruise Terminals. A ship with thousands on board is being held at Kai Tak, while another is being held off the port of Yokohama in Japan, after passengers were found to have been infected with the virus.

There have now been 21 cases confirmed in Hong Kong and the territory reported its first fatality on Tuesday. The youngest patient is a 25-year-old male who had not travelled during the incubation period.

Stocks march higher for another day

Global shares were trading higher on Wednesday, extending a sharp rally this week as investors welcome market support from Beijing and bank on the economic impact of the coronavirus being less damaging than first feared.

In Europe, the Stoxx 600 index – a broad measure of the region’s biggest companies – was 0.6 per cent higher in morning trading. It has now clawed back nearly of all January’s losses.

In mainland China the CSI 300 index climbed 1.1 per cent, leaving it around 8 per cent below its levels before the virus burst into global attention in mid-January.

The moves back into risk assets this week have been based on a “significant” liquidity injection from the Chinese central bank, rather than new facts on the ground about the virus, Rabobank strategists said in a note.

Asian currencies suffer as virus weighs on monetary policy

Hudson Lockett in Hong Kong writes:

Currencies in the Asia-Pacific region lost more ground to the dollar as Thailand’s central bank surprised investors by cutting interest rates.

The Thai baht was recently down as much as 0.9 per cent. While it recovered to be almost flat in early European trading the currency was 3.4 per cent lower for the year to date. Thailand’s central bank on Wednesday cut interest rates to a record low as the country’s economy faced a hit from the virus, which has dragged significantly on tourist visits from China.

Singapore’s dollar fell 0.7 per cent and was the worst performer in the region after the country’s central bank said there was “sufficient room” within the currency’s trading band to accommodate easing of the exchange rate.

Virus threatens Apple’s iPhone production

Labour shortages in China are threatening to hamper Apple’s iPhone production, our colleagues at the Nikkei Asian Review have reported.

Travel restrictions owing to the spread of the coronavirus are expected to keep tens of thousands of workers stranded in their hometowns after the extended lunar new year holiday ends on February 10.

The shortage of labour could affect Apple’s plans to raise iPhone production this year, sources said. Hyundai, the South Korean conglomerate, said this week that it has had to shut down all of its car factories in South Korea after running out of components from China. 

Chinese smartphone maker Xiaomi and local electronic component maker BOE Technology rely on factories in Wuhan. Production losses are also expected from Taiwan’s Hon Hai, which makes most of the world’s iPhones. Shares in the company, also known as Foxconn, have fallen in the past two weeks. 

If the virus spread gains momentum, plans to resume production on February 10 may have to be revisited.

James Kynge and Mercedes Ruehl take a look at the threat to Apple in their latest Tech Scroll Asia newsletter. Check it out here.

Coronavirus weighs on Thailand’s economy

Analysts are expecting further interest rate cuts in Thailand, as the country’s economy takes a hit from the coronavirus outbreak.

Thailand’s central bank cut interest rates by 25 basis points earlier today, citing a rising economic risk from the disease. The monetary policy committee said it expects the Thai economy to expand “at a much lower rate in 2020” than previously forecast, with the country’s powerhouse tourist sector likely to be badly hit.

Prakash Sakpal, an Asia economist at ING, said one cut is unlikely to be enough.

Given that things might get worse before they get better, we can expect a couple more quarters of substantially weak growth …. We don’t think one rate cut will be enough in preventing the growth slowdown, let alone boosting growth. Two rate cuts from the central bank in 2019 didn’t help much either and growth continued to decelerate through the fourth quarter of the year.

FT Opinion: Centralisation hobbles China’s response

Yu Jie, senior research fellow on China in the Asia-Pacific programme at Chatham House, believes that the sluggish early reaction to the disease by Chinese officials should not come as a great surprise:

The hesitant early response to the outbreak sheds light on the way the Chinese bureaucracy approaches crises at a time when the party leadership is tightening control at almost all levels of society. At first, officials in Wuhan attempted to censor online discussions of the virus. This changed only after President Xi Jinping’s call for a much more robust approach was followed by a sudden increase in the state media coverage of the outbreak. There is no doubt that Mr Xi’s intervention will greatly speed up the response to the crisis, which should be welcomed.

Despite China’s experience with the Sars epidemic between 2002 and 2004, the sluggish reaction by officials in Wuhan should not have come as a surprise. The tendency among bureaucrats to play down crises is deeply entrenched. And, ironically, the party leadership’s recent push for greater bureaucratic accountability and its promise of stiffer punishment for those who take a “do little” approach have also contributed to the habit of covering up disasters.

You can read more of her comment for the FT here.

Airbus forced to extend closure of Tianjin A320 assembly plant

Airbus said an A320 assembly line in Tianjin remained closed after the end of the Chinese New Year break, in the latest blow to the aviation industry from the continuing coronavirus outbreak.

In a statement on Wednesday, the aerospace group said that restrictions on travel in China and beyond were “posing some logistical challenges”.

It said its Tianjin final assembly line – where it builds its A320 narrow-body aircraft – was “currently closed” without giving further details on when it would be reopened.

Airbus is constantly evaluating the situation and monitoring any potential knock on effects to production and deliveries and will try to mitigate via alternative plans where necessary.

The airline industry has been particularly hard hit by the viral outbreak, with carriers across the world suspending or reducing flights to both mainland China and Hong Kong. Cathay Pacific this morning asked its 27,000 employees to take three weeks of unpaid leave as it struggles to contend with a major drop off in demand.

Despite this, the chief executive of British Airways owner IAG said this morning that believes the overall impact of coronavirus on global air travel demand will be marginal.

Willie Walsh told an aviation conference in Doha that IAG has not identified the impact of the new virus on demand for its clutch of carriers, except for cancelled flights to China, according to a Reuters report.

Reports of coronavirus ‘cure’ boost stocks and commodities

Harry Dempsey in London reports:

Equities and commodities rallied sharply on Wednesday in moves that analysts put down to optimism that a cure to the novel coronavirus may soon be developed.

A local Chinese media report on Tuesday said that scientists in China may have made a major breakthrough on developing two drugs that can inhibit the virus.

Equity markets were trading higher, with the Stoxx Europe 600 up 1.1 per cent. Futures trade pointed to a 0.9 per cent rise on the S&P 500 when Wall Street opens later today.

Commodities with strong links to economic growth also rallied on the news, mitigating recent losses. Brent crude rose 2.9 per cent to $55.75 a barrel. Copper — a bellwether for the global economy — increased about 2 per cent to $5,634 a tonne.

Giovanni Staunovo, an oil analyst at UBS, said that “there has maybe been a cure found against the virus and it’s affecting all risky assets,” adding that “it is yet to be seen” whether the drugs will provide a fix to the problems caused by the virus.

He said that discussions were continuing in Vienna in the joint technical committee between Opec members and fellow producers about whether to deepen production cuts to support oil prices, with a firm course of action yet to be decided.

Emoticon WHO plays down reports of virus treatment

The World Health Organisation has played down Chinese media reports of a breakthrough in attempts to find a cure to the current strain of coronavirus.

“There are no known effective therapeutics against this 2019-nCoV ,” a spokesman for the international body told the FT.

The organisation added that it recommends any potential drugs are enrolled into a randomised controlled trial, and is scheduled to hold a press conference at 3pm London time.

Stock markets and commodities have rallied again today, with traders attributing at least some of the moves to hopes of a breakthrough treatment. The Stoxx Europe 600 index gave up some of this session’s sharp gains following the WHO’s announcement, although it was still trading 1 per cent higher a few moments ago.

Xi calls for crackdown as fight against virus reaches ‘crucial stage’

Christian Shepherd reports from Beijing:

Chinese President Xi Jinping on Wednesday warned that the fight against the virus was at a “crucial stage” and called for those who undermined prevention measures to be held to account by law.

Mr Xi, who was speaking to Chinese Communist party committee tasked with improving China’s legal system, stressed that it was “vital” for efforts to curb the outbreak to remain “scientific” and in accordance with Chinese law.

Violence against doctors, price gouging, “rumour mongering”, selling fake goods, rejecting prevention measures and the misuse of donations meant for fighting to virus were singled out by Mr Xi as punishable offences.

The statement comes as many in China have raised concerns about the provision of medical supplies, especially in central Hubei province, the centre of the outbreak, where hospitals are overworked. A number of medical masks sellers have been punished for selling knockoff products.

Analysis: Why coffee has been caught up in the coronavirus sell-off

Despite today’s uptick, the coronavirus outbreak has unsettled global markets in recent weeks, hitting equity and commodity prices alike as concerns grow about its impact on economic growth.

But as Emiko Terazono, commodities correspondent reports, a less obvious casualty has been the humble coffee bean.

The benchmark index for coffee futures has plunged more than one-fifth since the start of the year to around $1 a pound. This is a bigger dip than crude oil marker Brent, down 17 per cent, and copper, which has lost 9 per cent on the London Metal Exchange.

China is an important participant in the global coffee industry, with imports more than tripling over the past decade. That, combined with the nation’s potential for significantly higher forecast growth, has unsettled investors — even though China accounts for only about 2 per cent of global consumption, according to Rabobank.

Two of the country’s largest coffee chains decided to temporarily shut stores in response to the outbreak. Starbucks announced it had closed more than half of its 4,300 outlets in China, while Luckin Coffee dealt a further blow by shutting its stores in Wuhan.

For more on this, read Emiko’s full piece here.

Moody’s expects virus to weigh on Hong Kong’s credit profile

Moody’s has said it expects the outbreak of coronavirus to weigh on Hong Kong’s credit rating profile as the risk to a further contraction in the territory’s economy increases.

The rating agency – which reduced Hong Kong’s rating by one notch to Aa3 from Aa2 in January – highlighted the catering, retail, tourism and consumer sectors as particularly vulnerable as the disease weighs on peoples’ behaviour and spending patterns.

The territory’s economy was already under severe strain from a protest movement which has regularly ground the city to a halt and led to violent clashes between police and protesters.

Still, Moody’s thinks Hong Kong’s substantial fiscal and foreign exchange reserves would limit the credit negative implications of any sharper recession. Its analysts added:

The degree of economic shock will depend on the duration and severity of the virus outbreak, and the extent of policy easing by the Hong Kong government.

Markets retain gains despite WHO downplaying hopes of virus ‘cure’

Commodities and equities markets have remained upbeat this afternoon, despite the World Health Organization playing down claims that a cure to the novel coronavirus may soon be developed.

Analysts have attributed a sharp rally in the price of stocks and oil today in large part to a report yesterday in Chinese media that suggested “a major breakthrough” in the scramble to find a cure.

The WHO sought to downplay the significance of the report today, however, insisting that there remain “no known effective therapeutics” against the new strain of coronavirus.

But markets appeared to generally have shrugged off the medical body’s word of caution and clung onto their gains.

The Stoxx Europe 600 was recently trading up 1.3 per cent, just off its 1.35 per cent rise earlier today. Brent crude, the international oil marker, added as much as 3.5 per cent earlier and was recently trading up 2.9 per cent at $55.53 a barrel.

Futures trade pointed to a 0.9 per cent rise on the S&P 500 when Wall Street opens later today.

Jane Sydenham of Rathbone Investment Management said an injection of liquidity from the Chinese central bank has also soothed markets this week.

While there is a sense from investors that central banks will prop up the economy, what will matter most for investors is exactly how long the disruption caused by the virus will last.

Lagarde warns on ‘new layer of uncertainty’

Martin Arnold in Frankfurt writes:

Christine Lagarde, president of the European Central Bank, said the outbreak of the coronavirus was adding “a new layer of uncertainty” that would weigh on the eurozone economy after it slid to a “weak” fourth quarter.

“The short-term uncertainties are mainly related to global risks – trade, geopolitical and now the outbreak of the coronavirus and its potential effect on global growth,” Ms Lagarde said during a speech in Paris on Wednesday.

While the threat of a trade war between the United States and China appears to have receded, the coronavirus adds a new layer of uncertainty. So we’re continuing to monitor closely how these risks develop and how they feed into our central scenario for the economy.”

The outbreak is causing major disruption to China’s economy that has rippled through global manufacturing supply chains and prompted many economists to cut their 2020 growth forecasts.

Even before the outbreak started, the eurozone economy slowed to below-forecast growth of only 0.1 per cent in the final three months of last year, when both the economies of both France and Italy contracted and Germany narrowly avoided a recession.

Ms Lagarde, the former head of the IMF who replaced Mario Draghi at the ECB last November, shrugged off the disappointing performance. “Though GDP growth in the last quarter was weak, it was broadly in line with our expectations,” she said.

Store closures could mean $1bn hit to Nike sales, says analyst

Nike could suffer as much as a $1bn hit to its sales in its fourth quarter following its decision to close half of its stores in China because of the coronavirus outbreak, an analyst note has surmised.

A New York-based analyst, who admits he is taking a “stab” at the potential impact of Nike’s temporary closure plan, suggests that about $233m of sales could evaporate in its fiscal third quarter. That could rise nearly fivefold by the following three months.

“What if half of Nike’s Greater China sales go to zero in F4Q (all else equal)? This scenario implies that $1.03bn of sales go away,” wrote Rick Patel from the brokerage Needham in a note to investors.

Mr Patel reached his third-quarter estimate by assuming the following: three-quarters of the sales in the third quarter were complete before the stores were closed; a quarter were generated in February when the virus became a concern; and half of its sales “went to zero” from this month.

The US sportswear group said on Tuesday the outbreak would have a “material” effect” on its operations in the Greater China region, which accounted for 17 per cent of the group’s overall revenue in the fiscal year ended in May 2019. The company had announced its closure plans a few hours ago.

For now the brokerage is maintaining its estimates until there is “greater clarity”.

Lex: No holiday for Cathay Pacific

The FT’s Lex team gives its take on the latest move from Hong Kong’s flag carrier.

Cathay Pacific has asked all its 27,000 staff to consider taking three weeks of unpaid leave over the next few months. The move, along with steep capacity cuts, is a response to the coronavirus epidemic. It will not be enough to offset losses. But the embattled Hong Kong flag carrier needs to do what it can to preserve capital.

The outbreak’s rapid spread has rattled travellers’ nerves. Cathay will cut almost a third of its overall capacity, compounding a drop in traffic caused by the Hong Kong protests. A 2017 turnround plan has meant many years of cost-cutting. It has left little room for Cathay to trim anything other than wages.

The plan for three-week unpaid leave will help, but not by much. Even in the unlikely event that all staff could be persuaded to volunteer, savings would amount to just $163m based on last year’s staff wages. That is unlikely to prevent an operating loss in the first quarter. Total operating expenses were $6.7bn in the first half of last year.

It is not all bad for Cathay. Fuel costs — and associated losses from hedging — are a much bigger part of expenses. Those account for almost 30 per cent of its expenses and are nearly 50 per cent more than wages, its most recent figures suggest. Fuel costs will of course fall — grounded planes do not need a fill up. That should improve margins at its cargo business, which accounts for more than a fifth of revenues. International cargo volumes will be less affected by the disruption than passenger traffic.

Memories of Sars also add some comfort. A rebound in shares, after a drop of about a quarter, was swift after the 2003 epidemic. Within a year of the outbreak, visitors to Hong Kong quadrupled.

To read the full Lex note on Cathay Pacific click here.

Emoticon US stocks open up another 1 per cent

Stocks on Wall Street have opened up nearly 1 per cent, adding to a global rally that has seen markets retrace higher this week on dimming fears over the virus’s likely impact on the global economy amid stimulus from the Chinese central bank.

The S&P 500 has now risen 3.25 per cent this week, leaving in on course for its best weekly performance since June last year.

European and mainland Chinese equities also rallied, aided by Chinese media reports – now played down by the World Health Organisation – that there had been a breakthrough in attempts to find a treatment for the virus.

Singapore becomes country with second most confirmed cases

Stefania Palma reports from Singapore:

Singapore has reported four new confirmed coronavirus cases, taking the total to 28 and making it the country with most cases outside China.

They include a 40-year-old Singapore citizen, who is the husband of a previously announced case involving a tour guide working with Chinese travellers. A group from Guangxi, who interacted with the man’s wife, visited his jewellery shop. China has confirmed two travellers from the group are infected.

Two additional Singaporean citizens also tested positive for the virus. They are the 45-year-old husband and six month old child of a previously confirmed case, a health shop worker who came into contact with the Guangxi group. The baby is the youngest confirmed case in the city state.

None of these three individuals have recent travel histories to China.

The fourth case is a 42-year-old woman who travelled to Singapore from Wuhan and is the mother of a previously confirmed case.

Test results for 62 suspected cases are pending.

Malaysia and South Korea this week reported confirmed cases who attended business meetings in Singapore. The meetings’ 94 overseas participants have all left the country. Singapore has alerted the respective health authorities.

Bill Gates charity puts up $100m to fight outbreak

By Clive Cookson

The Bill & Melinda Gates Foundation has committed up to $100m for the global response to the coronavirus epidemic.

“The funding will help strengthen detection, isolation and treatment efforts; protect at-risk populations; and develop vaccines, treatments and diagnostics,” the health charity said. It will immediately commit up to $20m to “accelerate the detection, isolation and treatment of people diagnosed with the virus with the goal of interrupting transmission and containing the disease.”

“Multilateral organizations, national governments, the private sector and philanthropies must work together to slow the pace of the outbreak, help countries protect their most vulnerable citizens and accelerate the development of the tools to bring this epidemic under control,” said Gates Foundation chief executive Mark Suzman.

“Our hope is that these resources will help catalyze a rapid and effective international response. This response should be guided by science, not fear, and it should build on the steps that the World Health Organization has taken to date.”

Wellcome, the other big global medical charity, said it would commit up to £10m to coronavirus research.

Malaysia threatens to charge individuals who ‘disseminate lies’ about coronavirus

By Stefania Palma

Tommy Thomas, Malaysia’s attorney general, has said in a statement that “persons who initiate and disseminate lies on any issue relating to coronavirus on the internet shall be investigated, and if a case exists, be charged”.

Those accused of sharing misinformation on the virus will now be charged under Malaysia’s penal code, “which governs statements relating to public mischief”, Mr Thomas said.

The government has issued a number of statements rejecting social media posts as false. They included news of additional confirmed cases or of an Indian man dying from the virus in Malaysia.

“No freedom is absolute in any society at any point of time in history,” Mr Thomas said. “The constitutionally entrenched guarantees of free speech and expression and the statutorily guaranteed right not to censor the internet…do not give a license to propagate lies.”

Equatorial Guinea makes $2m contribution to China’s fight against outbreak

By Clive Cookson

Equatorial Guinea is supporting China’s fight against the coronavirus with a $2m “solidarity contribution”.

Gabriel Mbaga Obiang Lima, minister of mines and hydrocarbons, said:

China has always been a very strong and loyal supporter of the Republic of Equatorial Guinea and this contribution is a demonstration that Equatorial Guinea stands in solidarity with China and its people as it fights a global outbreak that has already cost too many lives. Our ongoing Year of Investment Initiative will be a testimony to the depth of our cooperation and relationship with China. It is a pleasure for Equatorial Guinea to support its partner in times of need.

Coronavirus may cost US economy $35bn in 2020

The coronavirus outbreak could cost the US economy $35bn this year, according to Oxford Economics.

The group said coronavirus could shave between 0.1 and 0.2 percentage points off US GDP growth in 2020, “assuming immediate disruptions to tourism, supply chain restraints for the frail manufacturing sector, and heightened uncertainty restraining business and consumer outlays”.

“The intensifying coronavirus outbreak constitutes a large negative economic shock to China that will ripple through the global economy,” said Kathy Bostjancic, chief US financial economist at Oxford.

Ms Bostjancic added that “it’s too early at this stage to rule out either a less severe or a more serious and long-lasting impact”.

Donald Trump’s top economic adviser, Larry Kudlow, recently estimated during an interview with Fox Business Network that the outbreak’s drag on US GDP would be in the range of “two-tenths of 1 per cent” in the first quarter.

Oxford maintained its view that the Federal Reserve will lower interest rates by a quarter-point in June 2020 but said the coronavirus outbreak raises the odds of an earlier cut.

WHO director distances himself from critical China remarks

Clive Cookson in London

Tedros Adhanom Ghebreyesus, director-general of the World Health Organisation, has distanced himself from critical remarks about China made to the FT on Tuesday by John Mackenzie, a member of WHO’s coronavirus emergency committee.

Dr Mackenzie, emeritus professor at Curtin University in Australia, called China’s initial failure to disclose enough information about the outbreak “reprehensible”. He said it defied logic that there was no increase in new cases in Wuhan while Chinese officials were holding local political meetings in January.

“I don’t think it helps now,” Dr Tedros commented, when he was asked at the WHO’s daily coronavirus press briefing on Wednesday about mistakes made by China in the early stages of the epidemic. Speaking in Geneva, he said: “Let’s take the action we can take today to prevent this outbreak from spreading all over the world.”

Dr Tedros repeated the call for $675m to fight the epidemic, which he had made to the WHO executive board on Tuesday. “$675m is a lot of money but it is much less than the bill we will face if we do not invest in preparedness now,” he said.

“Once again, we cannot defeat this outbreak without solidarity – political solidarity, technical solidarity and financial solidarity. Our message to the international community is ‘invest today, or pay more later’.”

At the same briefing WHO officials dampened hopes of imminent breakthroughs in developing coronavirus vaccines and treatments. “There are no proven, effective therapeutics,” said Mike Ryan, executive director of the WHO’s Health Emergencies Program.

The agency will carry out a systematic review of all drug candidates, including treatments for other viral infections such as HIV and Ebola, which might have some effect against coronavirus, Dr Ryan said.

Gold and oil to remain supported after virus concerns fade, says UBS

The price of gold has been broadly supported, and that of oil knocked, by the rapid spread of the coronavirus, but UBS thinks that both assets may have a brighter future ahead once concerns about the outbreak have faded.

Oil has taken a hit as investors price in an anticipated drop in demand from China where sectors ranging from tourism, travel, discretionary consumption and industry all face disruption. The upshot is that will probably prove temporary, UBS said, “with pent-up demand spurring a sharp recovery in growth and a comeback in oil demand from the 1Q slump.”

Additionally, from a supply perspective, UBS said it thinks Opec+ will announce an additional production cut of 500,000 barrels a day for the second quarter, and extend cuts through the remainder of 2020. The bank said it also expected the slower growth of US oil production to continue.

Gold, meanwhile, hit a near-seven year high of nearly $1,590 an ounce at the end of January as investors flocked to the asset, typically seen as a haven in times of market stress. It has since shed $40.

Although haven demand for gold may wane as the coronavirus outbreak is brought under control, “the yellow metal also has fundamental support from low real rates, which reduce the opportunity cost of holding gold, and is likely to benefit if the US dollar weakens as we expect,” UBS said.

Online interest in coronavirus is receding

News clicks, online searches and social media posts about coronavirus are on the decline, according to Goldman Sachs.

Economists at the bank analysed Bloomberg’s news trend monitor, Google Trends search data and tweets containing the word “coronavirus”. “News intensity around the outbreak, which appears to have peaked late last week, continues to recede,” they said.

Here on the left is a chart from Goldman showing the decline, while the chart on the right compares coronavirus to past outbreaks of bird flu, Ebola, Mers and Zika:

WHO requests $675m from global community to combat virus

The World Health Organization has launched a preparedness and response plan to combat the spread of the coronavirus and is seeking $675m in donations.

The plan seeks to protect countries with weaker health systems and is set to span the months of February to April 2020. The objectives include limiting human-to-human transmission of the virus, especially in the most vulnerable countries, identifying, isolating and caring for patients early, reducing virus spread from animal sources, minimising the economic impact and communicating critical information.

“My biggest worry is that there are countries today who do not have the systems in place to detect people who have contracted with the virus, even if it were to emerge,” said Dr Tedros Adhanom Ghebreyesus, WHO director-general. “Urgent support is needed to bolster weak health systems to detect, diagnose and care for people with the virus, to prevent further human to human transmission and protect health workers.”

Scott Pendergast, WHO director of health emergencies strategy, on Tuesday said he estimates the world would have to spend $675m on public health measures, including $61.5m needed by the WHO itself.

Versace parent becomes latest luxury group to quantify fallout

By Alistair Gray

The luxury conglomerate behind Michael Kors, Jimmy Choo and Versace has become the latest company to quantify the financial fallout, warning almost a tenth of its annual profits were threatened.

Capri Holdings, headquartered in London and listed in New York, said it had closed about 150 of its 225 stores in mainland China. Most of those that remained open were operating with reduced hours.

“We’ve assumed that nothing gets better through the end of March,” John Idol, chairman and chief executive, told analysts on Wednesday. “We don’t see anything that indicates that that will change.”

But he added: “China will return, and it will be a very key pillar of our growth.”

Luxury goods groups are among the most exposed of all western companies given the importance of Chinese demand. Before the outbreak, Asia was due to have generated about a quarter of Capri’s fourth-quarter revenue, and China accounts for over half its business in the region.

The company said on Wednesday that it currently expected the disruption to reduce revenue by about $100m. It estimated a hit of annual earnings per share of between $0.40 to $0.45, reducing its forecast guidance range to between $4.45 and $4.50. But the estimate “could materially change if the severity of the situation worsens”.

Mr Idol added: “Our thoughts and prayers go out to the people of China
and all those affected by this virus globally… We can only hope for
a speedy and positive resolution.”

US stocks go for third straight advance

Wall Street is trading near session highs as investors focused on upbeat data on the US economy.

The S&P 500 was up 0.9 per cent in afternoon trading in New York, with energy and health care shares leading the charge. The Nasdaq Composite rose 0.2 per cent, dragged down by a 18 per cent drop for Tesla that threatened to end the stock’s six-day winning streak.

The Dow Jones Industrial Average fared best, jumping 1.3 per cent, as members UnitedHealth and IBM posted gains of more than 5 per cent apiece.

A survey from the Institute for Supply Management showed the large US services sector grew at a faster pace in January compared with the prior month. The report came on the heels of a positive reading for the manufacturing sector, which registered its first month of expansion since July.

In other data, private-sector payrolls grew by 291,000 in January, according to payroll processor ADP. That beat economists’ forecast of 156,000 jobs.

Investors continued to move out of government debt, driving yields higher. The yield on the 10-year Treasury note was up 4.3 basis points.

The dollar index gained 0.3 per cent.

Taiwan imposes quarantine restrictions on travellers from China, Hong Kong, Macau

Naomi Rovnick in London

Taiwan, which does not consider itself part of China, has said that people who have been to mainland China and the two semi-autonomous regions of Hong Kong and Macau must quarantine themselves at home for 14 days.

The move is potentially disruptive for the many Taiwanese executives, business owners and financial services workers who travel regularly to mainland China and Hong Kong for work.

But Taiwan’s Centers for Disease Control said the deep business links with these other Chinese- speaking economies was a cause for concern. The CDC said on the English language version of its website:

Considering the severe outbreak situation in China and close cross-strait social and commercial exchanges, on February 5, the Central Epidemic Command Center (CECC) announced that starting from February 6, travelers with a history of travel to China, Hong Kong and Macau are required to be under home quarantine after entering Taiwan.

The decision is striking because while mainland China has reported more than 24,000 cases of the virus, Hong Kong and Macau have discovered 21 and 10 respectively, according to Hong Kong authorities as of 6pm local time on Wednesday. Each have fewer cases than Japan, Thailand and Singapore.

Hong Kong itself is now quarantining all visitors from China. More than 30 Chinese cities are either on lockdown or have restricted their residents’ movements.

US health officials confirm 12th coronavirus case

Wisconsin has confirmed that an individual has tested positive for coronavirus, the 12th case in the US.

The Midwestern state’s department of health services said the patient is an adult “with a history of travel to Beijing, China prior to becoming ill and was exposed to known cases while in China”. The person, who was not identified, is “isolated at home” and doing well, according to a statement on Wednesday.

The case was also confirmed by the CDC.

The immediate health risk to the public remains low, officials said.

Yum China warns coronavirus could wipe out 2020 operating profits

Coronavirus could drag Yum China to an operating loss this year after the fast-food group closed thousands of its restaurants due to the outbreak.

At stores that have remained open, comparable sales since the Chinese New Year slid 40-50 per cent versus the same holiday period a year earlier, with Yum China citing weaker foot traffic and shortened hours.

“As a result of the outbreak, the company may experience operating losses for the first quarter of 2020, and if the sales trend continues, for the full year 2020,” Yum China said in its fourth-quarter earnings report.

Analysts have forecast an adjusted operating profit – which strips out one-time costs – of $304.4m in the first quarter and $973.7m in 2020.

Yum China said it has temporarily closed more than 30 per cent of its restaurants in China, as retailers across the region shut down in an effort to combat the spread of coronavirus.

The company added that it cannot estimate when it will be able to re-open the shuttered locations, and it may need to close additional stores or reduce hours.

Yum China, which had 9,200 restaurants at the end of December, owns the Pizza Hut, KFC and Taco Bell brands in China.

In the fourth quarter, Yum China reported total revenues of $2bn, up 6 per cent year-over-year and matching estimates. Adjusted earnings per share of 25 cents topped analysts’ forecast of 19 cents.

New York-listed shares of the group fell more than 3 per cent in after-hours trading.


Coronavirus cases in China exceed 28,000

The number of confirmed coronavirus cases in China has climbed above 28,000, according to official data released early Beijing time on Thursday.

Confirmed cases: 28,018
Deaths: 563

Source: National Health Commission