The global sell-off was caused by weekend reports of a spread in the coronavirus outbreak, with deaths reported in Iran, more than 200 confirmed cases in Italy and South Korea jumping up the ranks to have one of the biggest number of diagnosed infections outside mainland China. Broadly speaking, the illness has had an impact on the flow of people, tourism, trade, supply chains and demand for commodities.
Chinese officials reported 508 new cases as on Monday, 24 February 2020, though the overall total in mainland China is nearly 77,658 infected, with 2,663 deaths. Italy, has the largest known outbreak outside of Asia, with more than 200 confirmed cases and six deaths as of Monday. The South Korea, a critical link in the technology industry's pan-Asian supply chain, reported 60 new cases, bringing the number of infected cases to 893 and death toll of 8, and a lawmaker in Iran said the death toll from the city of Qom is 50.
On Saturday, 22 February 2020, the International Monetary Fund warned the virus outbreak could reduce global economic growth by 0.1% this year, and drag China's annual growth 0.4%age points lower than January estimates. Economists at Standard Chartered Bank on last Friday, 21 February 2020, estimated that COVID-19 epidemic could affect 30% of China's imports and 10% of its exports, prompting them to lower their gross domestic product forecast for China this year to 5.5% from 5.8%.
Factories around the world are grappling with parts shortages as their Chinese suppliers struggle to resume normal operations. With global economic engines sputtering, the Federal Reserve and other central banks facing face calls for emergency help. Central banks across Asia have already been easing policy, while governments have promised large injections of fiscal stimulus, something western countries might also have to consider. But central bank chiefs may be ill equipped to battle the economic consequences of the flulike illness, which has prevented many Chinese workers from returning to their assembly lines and kept consumers shut at home instead of shopping.
CURRENCY NEWS: China's yuan edged down against the dollar on Tuesday, hurt by corporate demand for dollars and worries over the global spread of the coronavirus outbreak. Fears mounted that the outbreak that began in China will grow into a pandemic with disruptive and deadly consequences for countries around the world, after sharp rises in infections in South Korea, Italy and Iran. Several senior central bank officials also pledged that the PBOC will take further steps to support the virus-hit economy, including releasing more liquidity and lowering funding costs for companies. The central bank has already delivered an interest rate cut last week, after having already injected over $200 billion in liquidity. Monetary easing and higher liquidity injections should boost the economy in the long run, though it will pose a drag on the yuan in the short term.
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