The U.S. stock market is in freefall over the coronavirus pandemic. Wall Street has turned totally bullish after President Donald Trump announced a travel ban to stem the negative human and economic impacts of the worsening coronavirus outbreak. The U.S. president’s latest move, to suspend travel from certain areas of Europe to the U.S. for the next 30 days, will devastate scores of businesses.
The Dow (INDU) futures plunged more than 1,000 points on President Trump’s proclamation. Meanwhile, Europe’s stock markets fell dramatically at the open. London’s FTSE 100 (UKX) dropped 5%, Germany’s DAX (DAX) declined 5.4% and France’s CAC 40 shed 4.5%, and Italy’s benchmark stock index, which has dropped 18% this week, fell another 5.9%. Experts we’re talking to say there’s no telling where it all will end. Most hospitality execs I talk to are almost in a panic over the situation. MUFG economist Chris Rupkey is cited stating the obvious in a Yahoo! News report:
“The U.S. limiting entry to foreign nationals from Europe has the potential to cause another world depression again even if it is for reasons that seek to stop the spread of the coronavirus. Business activity is going to hit the brakes around the world and stock markets around the world are in freefall as the spread of this deadly pandemic virus has the potential to slow the global economy to a crawl.”
The travel ban begins tomorrow at midnight and applies to countries in the Schengen Area, a zone without border controls that includes Italy, Germany, France, Spain, and 22 other nations. Trump has not included the United Kingdom, so far.
Meanwhile, Italy has virtually shut down, many nations are considering closing borders, and it only seems to be a matter of time before more extreme measures are taken. Japanese and other Asian markets are already nosediving over the news. Airlines and air hubs are first in line among businesses in Europe that will suffer. According to Forbes, countries most impacted are Germany, France, and the Netherlands. Air France, KLM, Delta, and Germany’s Lufthansa seem poised to take the biggest hits. But this is only the tip of a monstrous COVID-19 iceberg.
The Coronavirus outbreak is the most disastrous threat to global business since the Great Depression of the last century. Italy going into total lockdown is not being reported on enough. Few can imagine how this will affect the country, and especially in the tourism sector. This report frames how Italy’s Amalfi Coast has been transformed overnight into a virtual ghost town. “La dolce vita“, or the sweet life, has been replaced with a pandemic nightmare where not a soul will visit Italy for months. The damage is inestimable if you think about it. And this is just the Italy component of a much wider disaster. Denmark just became the second European country to go into lockdown.
Spain is about to be set back over a decade to the 2008 financial crisis unless someone steps in. Tourism is the third biggest industry in the country, and according to the Spanish hoteliers’ confederation, reservations are down 20-30% already. The fact that Barcelona retail got boosted by 38% on account of Chinese tourists in 2019 should be telling. Imagine hotels and travel dependent businesses losing a third of their already chopped revenues! It’s a catastrophe.
Here in Greece officials and the private sector are scrambling like crazy to come up with ways to mitigate the damage. The country’s Tourism Minister Harry Theoharis and execs from British Airways Holidays met to try to establish an incentive strategy to support air connectivity and passenger flows to Greece from the UK to offset the COVID-19 situation. Greeks are even proposing tax breaks, suspending VAT payments, and other measures to lure tourists, but these efforts seem the last gasp as the latest travel ban will only be the beginning of Europe’s touristic woes.
Greece is particularly vulnerable because of the country’s sensitivity to foreign markets. This pandemic amplifies internal and external factors that will more than likely put the brakes on the country’s resurgent economy. Yesterday the World Health Organization (WHO) characterized the coronavirus (COVID-19) as “a pandemic and underlined that it will touch every sector.” But, this seems like an understatement if we try and project mid-range outcomes.
In Croatia, as many as two-thirds (66 percent) of the country’s companies are already feeling the negative effects of COVID-19. More than half, as many as 53 percent of related businesses have experienced a drop in turnover, according to a poll recently conducted by the Croatian Chamber of Commerce (HGK). As time goes on the most recent travel ban will degrade these numbers even further.
Finally, the recent announcement that would cancel flights to major European destinations until the end of April hints at the coming economic catastrophe for Europe, and the world. Russian state-owned airline Aeroflot announced it would cancel flights to 18 European cities in Italy, Spain, France, and Germany starting on March 13 and running until the end of April.
There are going to be debt delinquencies, defaults and investment dramatic losses subjecting the economy to what economists call a negative feedback loop. And hardly anyone is talking about the massive debt that experts have advised U.S. investors to accrue during the “Bear market” that’s been going on since Trump took office. Business borrowings in the United States nonfinancial corporate sector stood at $10.1 trillion in the third quarter of 2019, up from $7.1 trillion when Obama was in office. And this says nothing for European investors, supply shocks, trade disasters, and a laundry list of other affected sectors.
The final tally on this COVID-19 outbreak will certainly be historic.
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