If the World Health Organization declares the coronavirus a "global emergency," it will hit the economy hard, triggering a potential stock market sell-off.
The US stock market has held up well after Monday’s brutal coronavirus-triggered selloff. And Dow Jones Industrial Average (DJIA) futures point to another steady open on Wednesday.
But that could all change in an instant. So far the World Health Organization (WHO) has refrained from using two key trigger words: “global emergency.”
Some experts say the declaration is inevitable as the virus spreads outside China. And that could trigger a fresh wave of selling.
“I don’t think the market’s ready for a death in this country, which could happen. I don’t think the market’s ready yet for the WHO to declare the coronavirus a pandemic” – Jim Cramer, CNBC.
The virus has now claimed 132 lives and infected more than 6,000 worldwide. The WHO has twice refused to declare the coronavirus outbreak a global emergency, a move that would trigger flight disruption and trade restrictions.
But it may only be a matter of time before the WHO is forced to issue the declaration.
“As information is coming in, it seems to be confirming our worst fears … So I do believe that the WHO is going to have to declare an emergency and is going to have to take the lead … You can’t leave this to China” – Lawrence Gostin, Georgetown Law.
Even if the WHO doesn’t act, some airlines are taking matters into their own hands. This morning, British Airways suspended all flights in and out of China.
The WHO was criticised in the past for declaring the 2009 Swine Flu pandemic a “global emergency” too soon. The move disrupted the economy unnecessarily and the declaration may hit the Dow Jones and global markets. This time, the coronavirus have accelerated faster.
“Most of the World Health Organization’s (WHO) criteria for declaring a global emergency have been met, but it is awaiting clear evidence of a sustained spread of the new coronavirus outside China before doing so” – Reuters.
One criterion is human-to-human transmission outside China. That has now been confirmed in Germany, Japan, Vietnam, and Taiwan.
The WHO panel was reportedly split 50-50 on whether to declare a global emergency at the previous meeting. In light of this new information, they may be moved to act.
Elsewhere on today’s agenda is the Federal Reserve interest rate decision. Chairman Powell is almost certain to stand pat on interest rates.
Turning to corporate earnings, we’ll hear from McDonald’s, Boeing, Facebook, Tesla, Microsoft, and PayPal later today. It comes off the back of strong numbers at Apple last night.
This article was edited by Samburaj Das.
Last modified: January 29, 2020 12:37 PM UTC