Coronavirus Cases Climb; Dow Sinks Along With Mortgage Rates

As the Coronavirus spreads beyond the borders of Asia, its effects are casting a widening shadow that is being felt in just about every industry, across most of the world. Not only are the financial markets dropping along with tourism and mortgage rates, but manufacturers are also taking a production hit.

The Dow Jones Industrial Average sank close to 1,000 points, The Wall Street Journal reported. In addition, the 10-year Treasury note yield fell to nearly a record low. The S&P 500 dipped 4 percent, while the Nasdaq Composite dropped 5.3 percent. The blue-chip index fell by 2.8 percent.

Although the major U.S. stock indexes had been experiencing new highs in recent weeks, gains started losing ground as the Coronavirus’ global supply chain disruption became more evident. A rash of new cases in South Korea, Iran and Italy over the weekend also gave rise to investors’ cold feet.

Freefalling U.S. bond yields took mortgage rates down toward a four-year low that is anticipated to drop even more. The 30-year fixed mortgage average dropped to 3.34 percent on Monday (Feb. 24). Rates haven’t been this low since 2012, except for a single day in the summer of 2016 when the rates hit 3.34 percent.

Debt refinancing is also being affected by the Coronavirus. Marseilles, France-based CMA CGM SA, the world’s third-largest container shipping company, is looking to extend loans totaling roughly $400 million. One of the largest maritime carriers out of China, the company is also negotiating with creditors to refinance bonds maturing in January 2021 totaling about $784 million.

Coronavirus “has weakened sentiment of investors toward the credit, which was already burdened by a high debt load,” Jayanth Kandalam, a credit analyst at Lucror Analytics in Singapore, told Bloomberg. “A refinancing per se may be challenging in the near term unless results improve.”

Meanwhile, France – among the most visited countries worldwide – has seen tourism drop 30 to 40 percent. Over 200,000 flights have also been canceled as demand for air travel has taken a dive. Nearly 8 percent of France’s gross domestic product comes from tourism; the country hosts 2.7 million Chinese tourists each year, a number that won’t be reached in 2020.

Travel is not suspended within the border-free Schengen area, despite Italy being the most affected country outside Asia. However, the European Commission said the European Union is preparing contingency plans.

The Coronavirus has caused the deaths of four people in northern Italy, and about 150 cases have been reported since Friday (Feb. 21).

As manufacturing takes a hit in many industries, Primark owner Associated British Foods said there would be some clothing line shortages due to production issues in China, where it sources in excess of 40 percent of Primark’s product. AB Foods also operates several food businesses in China. It completed its sugar processing there before the virus outbreak, but other factories are running at a reduced capacity.