The economic and investment market implications of the coronavirus outbreak

The global spread of COVID-19 has increased the risk of greater economic disruption for longer, resulting in, say, a 20 percent fall in stock markets. Our base case of containment, however, is that Chinese, global and, hence, Australian growth will rebound in the second quarter (avoiding recession in Australia’s case), although the risk of a delay is significant. Against this background, stock markets, commodity prices and the Australian dollar remain at high risk of more downside in the short term. But assuming some containment and a growth rebound in the second quarter of 2020, markets should rebound by then. Easier-than-otherwise monetary and fiscal policies — with ever more stimulus measures announced in China and more monetary and fiscal easing globally — would add to this. The key things to watch for remain a further downtrend in the daily number of new cases globally and a peak in new cases in developed countries.

In a big-picture sense, the fall in stock markets