At the time of this writing on 25 February, the week was seeing a renewed escalation in concern that the coronavirus outbreak (COVID-19) has become or is becoming a global pandemic. This is first and foremost a human crisis, and our thoughts are with all those affected and those trying to combat the outbreak. Naturally, though, investment markets are starting to become increasingly concerned about the disruptive impact on economic activity. As a result, while most stock markets recovered their initial decline on the back of the virus with some hitting new highs the prior week, we are now seeing renewed sharp falls.

Scenarios

Our prior assessment on 5 February saw as our base case, with 75 percent probability, that the outbreak would be contained within a month or two. This could still see more downside in stock markets and bond yields, but there would be a rebound by the second quarter as growth recovers. The downside case saw a full-blown pandemic wi