International equity markets fell sharply last week as the fallout from the coronavirus sparked wide- spread selling. Indices in the US all closed down more than 10%, with the Dow Jones Industrial Average and S&P 500 recording their seventh consecutive losing session on Friday. In New Zealand, the NZX 50 fell around 7% last week, its worst week since the financial crisis.

Meanwhile, bond prices rose, pushing yields towards record lows. In the US, the 10-year government bond yield fell to a record low below 1.2%, and in New Zealand, the 10-year equivalent fell around 15 basis points over the week to close at 1.07%, its lowest level in five months.

What’s happening in markets

The coronavirus concerns escalated last week as the spread of the disease outside of mainland China raised fears of a potential pandemic that some fear could halt the flow of goods and services leading to a supply and demand shock. This sentiment was shared by Bank of England Governor Mark Carney, who said on Friday that supply chains “are getting a little tight. That’s lower activity.”

In Europe, at least ten countries have reported cases of the virus, with Italy being the worst hit with more than 1,000 confirmed cases.

Meanwhile, the US reported its first coronavirus death, leading to heightened travel restrictions to the country. Furthermore, on Thursday, California Governor Gavin Newsom said the state is monitoring more than 8,000 people who arrived on flights from Asia. The state currently has nearly 60 confirmed cases, including those who were repatriated from China and the cruise ship that was docked up on Yokohama, Japan.

New Zealand reported its first case of coronavirus. Prime Minister Jacinda Ardern said the person was in improving condition. It is believed the person had travelled from Iran via Bali.

All told, the World Health Organization said last week that the number of new cases outside of mainland China exceeded those in China. According to the WHO, as of Friday, there were now 2,790 cases in 37 countries, and 44 deaths outside of mainland China.

The severity of the equity market selloff marked several milestones last week:

1. Stock indexes in Europe and the US entered into ‘correction’ territory, a decline of more than 10% from a recent high.
2. The S&P 500 marked its fastest ever correction, taking just six sessions to fall 10% from its 19 February high.
3. The Dow Jones Industrial Average had two daily declines of more than 1,000 points.
4. The NZX 50 recorded its worst week since the global financial crisis.