That’s hit sentiment in Europe, where stocks are falling further.
In London, the FTSE 100 is now down 85 points, or 1.2%, at 7,071 points - a new four-month low.
Models present creations from the Moncler Autumn/Winter 2020 collection during Milan Fashion Week in Milan, Italy February 19, 2020. Photograph: Alessandro Garofalo/Reuters
Luxury goods firms are expecting to lose tens of billions of pounds of sales because of the crisis.
A survey of top chief executives and finance officers estimated the industry could lose €30 billion to €40 billion in sales this year, for an estimated total sales of €309 billion in 2020.
Some of this is products that would have been shipped to China (where many stores are still closed). But it also covers potential sales lost because tourists from China, and beyond, will be staying home this year.
That would mean a 15% drop in earnings for the industry, or around €10bn.
The main concern is business in China, where sales are plummeting due to widespread store closures and shoppers hunkering down in their homes. The survey estimates as many as 10 million to 15 million products originally destined for China could go unsold, forcing companies to redirect those items to other parts of the world. Luxe outerwear company Moncler, for instance, said on a recent earnings call with investors and analysts that it had frozen shipments to Greater China and sent them instead to regions such as Europe.
But there’s also worry over a worldwide impact. Chinese tourists are big spenders on luxury goods and contribute to sales in cities from Tokyo to New York. Many have put off flying or face travel restrictions. In Paris, retailers have noticed a marked decline in shopping Chinese travelers.
Quartz(@qz)
Luxury companies have already warned of lost sales amounting to tens or hundreds of millions of dollars. https://t.co/aSVZFljQL4
Just in: US consumer confidence has risen, but isn’t actually as strong as expected.
The Conference Board’s index of consumer morale has come in at 130.7, rather weaker than the 132 which economists expected.
That’s still a rise, though, because January’s report has been revised down to 130.4 from 131.6.
Consumers reported that their current economic situation had worsened, but they’re optimistic about future prospects. Or at least they were! This survey took place before the virus escalated in recent days.
Kathy Jones(@KathyJones)
Consumer Confidence dips on lower present situation reading but expectations rise. Survey taken before coronavirus news became widespread.
The coronavirus could trigger recessions across the global economy unless it is contained soon, fears Dr. Kerstin Braun, president of Stenn Group (which provides trade finance).
We already know from our own research that half of firms in the UK and US (46% and 45% respectively) predict a recession in 2020, while a further third (37% and 35%) predict a global recession this year. These predictions could very much become a reality if the virus isn’t contained and every week we’re seeing news of another countries’ GDP hit. Tourism dependent countries, particularly those in Asia such as Thailand, Malaysia and Cambodia could be worst affected, after bookings have dried up from the globe-trotting Chinese who account for over 15% of the world’s tourism spending.
She warns that outbreak also threatens to harm global trade, and badly jolt the auto industry.
US imports are being held hostage at the ports when coming in via ship. Vessels need to wait 14 days until they are able to access the port and offload, slowing down US imports. For China, where the outbreak first began, the virus could topple China’s dominant manufacturing position and companies will need to diversifying their supply chains. This could lead to more balanced global trade relationships, particularly if emerging manufacturing countries such as Vietnam are about to capitalise on the opportunity. We know Chinese GDP in the first and second quarter will be impacted by the effects of the Coronavirus and its likely supply chains will move to Vietnam. We’ll also see more advanced goods such as tech going to India, and more apparel going to Bangladesh.
“The automotive industry will also be affected by the Coronavirus. Supply chains are slowing down in China as manufacturing is not at its full capacity. Factories are opening back up but with only about 50% of the workforce. Given the automotive industry is already struggling to adopt to the lower and changing demand for cars, particularly as more people are opting for electronic vehicles, the Coronavirus is likely the automotive industry could be soon hit.”
Breaking away from coronavirus.... more than 1,800 jobs are at risk at supermarket chain Tesco, as it shakes up its bakeries operations.
The Press Association has the details:
Tesco is to slash more than 1,800 jobs as part of changes to bakeries in its large supermarkets.
The retailer said 1,816 bakery staff are at risk of redundancy as part of the overhaul, which will take place from May.
Tesco said it will convert 58 of its bakeries to be able to finish off pre-baked products in-store, and 201 sites will only bake some of its most popular items from scratch.
It said the move, which will also see bakeries at another 257 sites remain unchanged, means it will need fewer staff members.
Jason Tarry, Tesco’s UK and ROI chief executive, said: “We need to adapt to changing customer demand and tastes for bakery products so that we continue to offer customers a market-leading bakery range in store.
“We know this will be very difficult for colleagues who are impacted, and our priority is to support them through this process. We hope that many will choose to stay with us in alternative roles.”
Tesco said it will look to find other jobs for the staff, with “thousands of store vacancies” expected to be available across its network between now and May.
PA Media(@PA)
#Breaking More than 1,800 Tesco staff are set to lose their jobs as part of changes to in-store bakeries, the supermarket has announced
Shares in US biotech firm Moderna have surged by 20% in early trading in New York.
Last night, the Boston-based firm became the first company to release a potential coronavirus vaccine, which it has sent to the US National Institutes of Health to be tested in humans.
That doesn’t mean the vaccine is ready to be released, of course -- but it’s an important step forward.
Michael Antonelli(@BullandBaird)
Something to remember in all of this. Humanity fights back
"Moderna’s turnaround time in producing the first batch of the vaccine—co-designed with NIAID, after learning the new virus’s genetic sequence in January—is a stunningly fast response to an emerging outbreak".
Traders at the New York Stock Exchange. Photograph: Johannes Eisele/AFP via Getty Images
DING DING! The opening bell is ringing on Wall Street, as traders return to their desks after Monday’s whopping selloff.
And the early moves are up.
Shares are staging a small recovery after the Dow’s 1,000 point plunge yesterday, with technology stocks among the risers.
Dow Jones industrial average: up 155 points or 0.5% at 28,116
S&P 500: up 18 points or 0.5% at 3,244
Nasdaq: up 84.9 points or 0.9% at 9,306
So, a small recovery... can it last?
Upscale American department store chain Macy’s is starting to feel the impact of coronavirus.
After reporting results today, the company said it expects a “small impact” on sales in the current quarter, due to lower tourism levels.
This is “nothing to be concerned about yet”, Macy’s insisted, but it also cautioned that the situation is still “unfolding”.
Anne D'Innocenzio(@ADInnocenzio)
On coronavirus impact: Macy’s CEO Jeff Gennette says 70 Macy’s stores have a strong Asian business and have seen a slowdown in sales. But he said nothing to be concerned about yet. Those stores include store in Flushing,Queens and San Francisco’s Union Square. $M#Coronavirius
US shoe vendor Wolverine World Wide has warned that the coronavirus will hurt its profitability, by disrupting its supply chain and cutting sales.
Wolverine, whose brands include Hush Puppies, Merrell and Bates, predicts that Covid-19 will knock $30m off its revenues in the first half this year.
That will also reduce profits by around 4%, or 10 cents per share, to around $2.20 per share.
It says:
In recent years, the Company has diversified its supply chain away from China and in 2020, China is expected to represent less than 20% of its global production, down from approximately 40% in fiscal 2019.
The Company is continuing to monitor and adjust to the fluid coronavirus situation, and recognizes that there could be additional future impact to the global supply chain or customer demand.
The coronavirus is having a painful impact on Italy, forcing several towns to lock down.
The Italian economy was already on the brink of recession, and financial analyst Kathleen Brooks of Minerva fears it could be driven in to a deep crisis:
kathleen brooks(@KATHLEENBROOKS)
If Covid-19 continues to expand, the the most worrying thing is how long it will take for public confidence to return to normal once the outbreak dies down. This could lead to a wide economic impact and may be priced in to financial markets in coming weeks
The economic impact of Covid-19 could last a lot longer than the typical fly season. Italy’s economy is v weak, tourism is important to the economy of northern Italy, it also has v high debt levels, this could lead to a severe crisis for Italy’s economy.
Bill McBride (@calculatedrisk)
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