The World Health Organization (WHO) on Monday downplayed the prospects of the coronavirus outbreak becoming a worldwide pandemic — which came as little comfort to global markets that sold off in the wake of an eruption of new infections outside of China.
Across the globe, cases are nearing 80,000, while more than 2,600 deaths have been reported. China remains the epicenter of the outbreak, and the rate of new infections there have slowed. However, investors and officials have become unsettled by an explosion of cases in Iran and Italy — which rapidly morphed into one of the world’s largest concentration of infections, second only to South Korea.
A pandemic would be defined by a worldwide spread of the virus that has exposure for the whole world’s population — not unlike the flu, which is usually seasonal but in rare circumstances can become a pandemic.
“What we don’t understand yet in Covid-19 are the absolute transmission dynamics,” said Michael Ryan, executive director of the health emergencies program at WHO. Although the organization said on Monday that the pathogen was “not yet” a worldwide threat, that risk was becoming more acute.
“Now is the time to prepare. We are in a phase of preparedness for a potential pandemic,” Ryan added.
While the threat to the U.S. remains low, Reuters reported the White House would request as much as $1 billion from Congress to fight the outbreak.
‘No guarantee’ crisis will end by summer
Monday saw the third major sell-off since the outbreak became a global concern at the end of January. The uncertainty that continues to surround the virus, and its impact on the global economy, have sent shivers down investors’ spine.
The hardest hit stocks continue to be travel, hospitality and luxury— many of which have curtailed or shut down travel into the world’s second largest economy, and sold off sharply in Monday’s plunge.
While analysts expect the impact to be a drag on first quarter growth, there’s a growing possibility that the crisis may overshadow the entire first half of 2020.
“There is no guarantee that this will die off in the summer,” Chris Meekins, a health analyst at Raymond James, told Yahoo Finance on Monday. “This could become a global pandemic.”
Economists are also increasingly worried about multinational companies that rely heavily on China for manufacturing and product demand.
“About 5% of S&P 500 revenues originate in China, although the supply chain exposure is likely larger,” UBS said in a note to clients.
“While markets have been weak over the last couple of days on concerns that the virus is spreading beyond China, we think it is too early to draw that conclusion, especially with global health officials on high alert,” the bank’s analysts added.
Some of the country’s largest companies, such as fast food and beverage giants and retailers, have indicated the virus could weigh on their performance overall in the first quarter of the year.
Warren Buffett said Monday that while companies are expected to see the impact from the outbreak, he doesn’t advise them to sell in the panic. Conversely, investors should take advantage of the dip in markets, he said.
Pharmaceutical stocks saw a boost, once again, as investors look for solutions to address the outbreak.
The biggest winners Monday were Johnson & Johnson’s Janssen Pharmaceuticals (JNJ), Sanofi and Gilead (GILD), both of whom are working with the U.S. government on a product. Gilead has already begun trials of antiviral drug it had already developed, but was not approved for use. The company has said it is already ramping up production of the drug, without knowing if it will be approved to fight the new coronavirus.
Nerves surround the olympics
China’s President Xi Jinping has said the virus is the country’s fastest-spreading public health crisis, and the economy may take a “relatively big hit,” according to reports over the weekend.
The 2020 Summer Olympics has emerged as growing concern, with the games set to be hosted in Tokyo this July. For now, Japan has confirmed the games will continue as planned, even as the country grapples with its own isolated number of cases.
“Countermeasures against infectious diseases constitute an important part of Tokyo 2020’s plans to host a safe and secure Games,” an Olympics spokesperson told Yahoo Finance in a statement.
“We have full confidence that the relevant authorities, in particular in Japan and China, will take all the necessary measures to address the situation,” the statement added.
Editor’s note: South Korea is the largest concentration of coronavirus infections outside of China.
Anjalee Khemlani is a reporter at Yahoo Finance. Follow her on Twitter: @AnjKhem