The Dow Jones faces a disastrous open as the coronavirus spreads across America and the U.S. embassy in Iraq is hit with a rocket strike.
- Dow futures plunged in early trade as geopolitical threats mount for the U.S. economy.
- Alongside a fifth confirmed case of Wuhan coronavirus in the United States there was also an attack on the U.S. embassy in Iraq on Sunday.
- Bulls are now nervously awaiting what could be sizable dip in the Dow Jones when it opens on Monday morning in New York.
The Dow looks set for an extremely rough start to the week as a multitude of geopolitical risks converge on a shaky stock-market. After a weak close on Friday, investors in the Dow Jones are now faced with missile strikes against the U.S. embassy in Iraq, as well as a rapidly escalating coronavirus epidemic in China, with multiple new cases reported in the United States as well. With many economists predicting that the U.S. economy’s historic run would only be halted by an “external shock,” almost on cue, we have not one but two highly significant threats to the Dow Jones’ quest for 30,000. Most recently, health officials confirmed the fifth case of Wuhan coronavirus in the domestic United States, this time in Arizona. Over the weekend, medics also acknowledged two cases in California, one in Orange County and the other in Los Angeles County. That’s a highly unwanted occurrence for an area already in mourning over the loss of its most beloved athlete, NBA superstar Kobe Bryant and his daughter Gianna in a helicopter crash. For investors paying close attention to the spread, California is of particular significance for three reasons. Firstly, California is the most populous U.S. state, with Southern California (mostly L.A. and Orange County) the most densely populated region. Secondly, California is comfortably the largest state economy in the United States, a little under double second place Texas. Finally, it has the largest Chinese-American community (estimated at more than 1.2 million), some of whom visit their country of origin for the Lunar new-year (January 25), making the threat of contamination more probable moving forward. Given the previous impact that virus epidemics have had on the stock market, major global indexes like the Dow Jones cannot ignore the spread of coronavirus within China.Fears are escalating that Beijing has been massively downplaying the rate of infections, and the crisis has hit during the most significant economic event of the year.
A huge hit to Chinese productivity is expected, with knock-on effects in the global economy inevitable. In Hong Kong, protests remain fierce, this time against state administered quarantine, as protesters set fire to the buildings designated for infected parties. Nick Note: The stock market balloon has found it pin.