By Gabriel D. Crossley
BEIJING (Reuters) – A coronavirus outbreak in China which has killed 81 people and spread to many countries is expected to hurt its economy, an engine of global growth, though analysts say it is too early to quantify the overall impact on businesses and consumers.
The consensus is that in the short term, economic output will be hit as Chinese authorities step up preventive measures, impose travel restrictions and extend the Lunar New Year holidays to limit the spread of the virus.
Millions who usually travel during this period have canceled their plans, with the government ordering that full refunds be provided to air and rail passengers
Shanghai said on Monday that companies cannot restart operations before Feb. 9, and businesses in the eastern Chinese manufacturing hub of Suzhou have been ordered to stay shut until at least Feb. 8.
The government has lengthened the week-long Lunar New Year holiday nationally by three days to Feb. 2.
Wuhan, a city of 11 million and the epicenter of the virus outbreak in central China, is already in virtual lockdown and severe limits on movement are in place in several other Chinese cities.
Many analysts are turning to Severe Acute Respiratory Syndrome (SARS), a coronavirus that originated in China and killed nearly 800 people globally in 2002 and 2003, to better understand the likely longer-term effects.
“The economy rebounded quickly after SARS faded away,” said Larry Hu of Macquarie Capital, in a note to clients. Transportation, restaurants and retail sales were hit, but Hu said on the whole SARS was “just a blip which didn’t change the big trend.”
This time, however, analysts say China’s increased reliance on consumption to drive the world’s second-biggest economy compared to early 2000s, could undermine growth.
“In China during 2019, consumption contributed about 3.5 percentage points to the overall real GDP growth rate of 6.1%. A back of the envelope calculation suggests that if spending on such services fell by 10%, overall GDP growth would fall by about 1.2 percentage points,” said analysts from S&P Global Ratings in a note.
The early data make for sober reading.
The usual Lunar New Year rush of spending on travel, tourism and entertainment is taking a beating already. Overall passenger travel declined by nearly 29% from a year earlier on the first day of the Lunar New Year, a transportation ministry official said.
With many cinemas closed, China’s theaters earned 1.81 million yuan ($262,166.86) from movie tickets on the first day of Lunar New Year, down more than 99% from the same day the previous year, according to data from Chinese movie-ticketing company Maoyan 1896.HK>.
Notably, external conditions in 2002-03 were favorable, whereas the coronavirus outbreak is “adding to existing growth headwinds,” said analysts from Nomura in a note. China’s GDP growth slumped to near 30-year lows in 2019, pressured by sluggish domestic demand and trade frictions with the United States.
China also now contributes more to global economic growth than it did 17 years ago, meaning any big domestic impact stemming from the virus will ripple through worldwide.
World shares fell to their lowest in two weeks on Monday on virus concerns, with demand spiking for safe-haven assets such as Japanese yen and Treasury notes.
Regions reliant on tourism, especially Chinese tourists, like Hong Kong, Thailand, Vietnam, Singapore and the Philippines seem most at risk of spillover effects from the virus, said Louis Kuijs, Head of Asia Economics at Oxford Economics, in an email to Reuters.
The virus has already spread to more than 10 countries, including the United States, France, Australia, and Singapore, although all the 81 deaths have so far occurred in China.
Singapore, the Southeast Asian financial and tourism hub, earlier on Monday warned of an economic hit from the outbreak.
“We certainly expect there to be an impact on our economy, business and consumer confidence this year especially as the situation is expected to persist for some time,” Singapore’s trade minister Chan Chun Sing said Monday.
(Reporting by Gabriel Crossley; Editing by Shri Navaratnam)
Toronto Stock Exchange hits record high on energy boost
* The energy sector climbed 1% tracking crude prices, which were buoyed by expectations that demand will recover rapidly in the second half of 2021. [O/R]
* The Fed kicks off its two-day meeting on Tuesday, and officials are faced with ongoing tension between their two main goals, as inflation rises faster than expected even with millions of Americans still unemployed.
* At 9:38 a.m. ET (1338 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 77.55 points, or 0.38%, at 20,235.2, an all-time high.
* Producer prices in Canada most likely rose 3.1% in May from April, pushed higher mainly by softwood lumber, Statistics Canada said in a preliminary flash estimate.
* The materials sector, which includes precious and base metals miners and fertilizer companies, lost 0.4%.
* On the TSX, 163 issues were higher, while 61 issues declined for a 2.67-to-1 ratio favoring gainers, with 17.47 million shares traded.
* The largest percentage gainer on the TSX was BRP Inc, which jumped 4.6%, after the insurance distribution company issued a $350 million worth substantial issuer bid.
* Its gains were followed by Aritzia Inc, which rose 4.5%, after the apparel retailer acquired 75% of the athletic apparel maker Reigning Champ in deal worth $63 million
* Miners First Quantum Minerals Ltd and Hudbay Minerals Inc, fell the most on the TSX, down 4.1% and 3%, respectively.
* The most heavily traded shares by volume were Canadian Natural Resources Limited, BCE Inc and Auxly Cannabis Group Inc.
* The TSX posted 18 new 52-week highs and no new low.
* Across all Canadian issues there were 102 new 52-week highs and five new lows, with total volume of 32.21 million shares.
(Reporting by Amal S in Bengaluru; Editing by Amy Caren Daniel)
Canadian dollar hits 7-week low
The Canadian dollar weakened against its U.S. counterpart on Tuesday as investors weighed prospects of the Federal Reserve turning less dovish, with the commodity-linked currency extending its pullback from a recent six-year high.
The loonie was trading 0.4% lower at 1.2192 to the greenback, or 82.02 U.S. cents, after earlier touching its weakest level since May 6 at 1.2204. Earlier this month, it touched its strongest in six years at 1.2007.
“We’ve had such a strong move with commodity currencies and that trade has been slowly getting unwound,” said Edward Moya, a senior market analyst at OANDA in New York.
“We are starting to see a little bit more of an expectation that you are going to have a slightly less dovish Fed tomorrow and the commodity trade could continue to get undone a little bit,” Moya added.
In a new policy statement and economic projections due on Wednesday, the Fed is expected to acknowledge the first conversations among its policymakers about when and how fast to pare back the massive bond-buying program launched last year.
The program has supported global economic recovery, boosting commodity prices. Canada is a major producer of commodities, including copper and oil.
Copper fell 4%, extending its pullback from a record high in May. Oil settled 1.8% higher at $72.12 a barrel.
Canadian housing data for May was mixed. Housing starts climbed 3.2% compared with the previous month, while home sales were down for a second month after a blazing start to the year.
Canadian consumer price data is due on Wednesday, which could offer clues on the Bank of Canada policy outlook.
The Canadian 10-year yield was little changed at 1.389%. On Monday, it touched its lowest intraday level in more than three months at 1.365%.
(Reporting by Fergal Smith; Editing by Jonathan Oatis and Peter Cooney)
G7 nations to boost climate finance
G7 leaders agreed on Sunday to raise their contributions to meet an overdue spending pledge of $100 billion a year by rich countries to help poorer countries cut carbon emissions and cope with global warming, but only two nations offered firm promises of more cash.
Alongside plans billed as helping speed infrastructure funding in developing countries and a shift to renewable and sustainable technology, the world’s seven largest advanced economies again pledged to meet the climate finance target.
But climate groups said the promise made in the summit’s final communique lacked detail and the developed nations should be more ambitious in their financial commitments.
In the communique, the seven nations – the United States, Britain, Canada, France, Germany, Italy and Japan – reaffirmed their commitment to “jointly mobilise $100 billion per year from public and private sources, through to 2025”.
“Towards this end, we commit to each increase and improve our overall international public climate finance contributions for this period and call on other developed countries to join and enhance their contributions to this effort.”
After the summit concluded, Canada said it would double its climate finance pledge to C$5.3 billion ($4.4 billion) over the next five years and Germany would increase its by 2 billion to 6 billion euros ($7.26 billion) a year by 2025 at the latest.
There was a clear push by leaders at the summit in southwest England to try to counter China’s increasing influence in the world, particularly among developing nations. The leaders signalled their desire to build a rival to Beijing’s multi-trillion-dollar Belt and Road initiative but the details were few and far between.
Johnson, host of the gathering in Carbis Bay, told a news conference that developed nations had to move further, faster.
“G7 countries account for 20% of global carbon emissions, and we were clear this weekend that action has to start with us,” he said as the summit concluded.
“And while it’s fantastic that every one of the G7 countries has pledged to wipe out our contributions to climate change, we need to make sure we’re achieving that as fast as we can and helping developing countries at the same time.”
Some green groups were unimpressed with the climate pledges.
Catherine Pettengell, director at Climate Action Network, an umbrella group for advocacy organisations, said the G7 had failed to rise to the challenge of agreeing on concrete commitments on climate finance.
“We had hoped that the leaders of the world’s richest nations would come away from this week having put their money their mouth is,” she said.
Developed countries agreed at the United Nations in 2009 to together contribute $100 billion each year by 2020 in climate finance to poorer countries, many of whom are grappling with rising seas, storms and droughts made worse by climate change.
That target was not met, derailed in part by the coronavirus pandemic that also forced Britain to postpone the U.N. Climate Change Conference (COP26) until later this year.
The G7 also said 2021 should be a “turning point for our planet” and to accelerate efforts to cut greenhouse gas emissions and keep the 1.5 Celsius global warming threshold within reach.
European Commission President Ursula von der Leyen said the G7 leaders had agreed to phase out coal.
The communique seemed less clear, saying: “We have committed to rapidly scale-up technologies and policies that further accelerate the transition away from unabated coal capacity, consistent with our 2030 NDCs and net zero commitment.”
The also pledged to work together to tackle so-called carbon leakage – the risk that tough climate policies could cause companies to relocate to regions where they can continue to pollute cheaply.
But there were few details on how they would manage to cut emissions, with an absence of specific measures on everything from the phasing out of coal to moving to electric vehicles.
Pettengell said it was encouraging that leaders were recognising the importance of climate change but their words had to be backed up by specific action on cutting subsidies for fossil fuel development and ending investment in projects such as new oil and gas fields, as well as on climate finance.
British environmentalist David Attenborough appealed to politicians to take action.
“We know in detail what is happening to our planet, and we know many of the things we need to do during this decade,” he said in a recorded video address to the meeting.
“Tackling climate change is now as much a political and communications challenge as it is a scientific or technological one. We have the skills to address it in time, all we need is the global will to do so.”
($1 = 1.2153 Canadian dollars)
(Reporting by Elizabeth PiperAdditional reporting by William James and Kate Abnett in Brussels and Andreas Rinke in BerlinEditing by William Maclean, Raissa Kasolowsky and Frances Kerry)
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