DealBook: The World Isn’t Ready for a Major Coronavirus Outbreak

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The World Health Organization said yesterday that coronavirus cases outside China were accelerating. Around 80,000 people in nearly 40 countries have been infected, and at least 2,600 have died.

Draconian measures in China have slowed the spread there, the W.H.O. noted, but the outbreak could prove hard to contain elsewhere. Most health experts are worried about Iran, Italy and South Korea. Japanese officials said today that the country, which has more than 800 confirmed cases, was at a “crossroads” in fighting the outbreak.

If other countries followed China’s “bold approach,” as the W.H.O. put it, widespread quarantines and other restrictions would hit the global economy hard. This fear was partially responsible for yesterday’s tumultuous markets, as investors hedged their portfolios, businesses revised their forecasts, and officials prepared for the worst.

Behind the scenes: The coronavirus live briefing on the NYT website has been running for 34 days and has been viewed more than 50 million times, half of those from readers outside the U.S.

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York and Michael J. de la Merced and Jason Karaian in London.

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Bucking the trend, the usual havens like U.S. Treasuries, the dollar and gold performed well. And if you’re brave enough to trade things linked to the VIX volatility index, the sharp, sudden lurch in trading has been a winner.

  • Updated Feb. 10, 2020

    • What is a Coronavirus?
      It is a novel virus named for the crown-like spikes that protrude from its surface. The coronavirus can infect both animals and people, and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is possibly transmitted through the air. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • How worried should I be?
      While the virus is a serious public health concern, the risk to most people outside China remains very low, and seasonal flu is a more immediate threat.
    • Who is working to contain the virus?
      World Health Organization officials have praised China’s aggressive response to the virus by closing transportation, schools and markets. This week, a team of experts from the W.H.O. arrived in Beijing to offer assistance.
    • What if I’m traveling?
      The United States and Australia are temporarily denying entry to noncitizens who recently traveled to China and several airlines have canceled flights.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.

Why are investors reacting now? Our colleague Matt Phillips shares his thoughts:

The coronavirus isn’t just a China story anymore. Expanding outbreaks in other countries have investors and analysts rethinking their knee-jerk calls that the economic impact of the virus would be transitory and largely limited to China and its Asian neighbors.

So far, economists have only snipped their expectations for the economic impact on the United States and the profits of American companies. But the sharp tumble in stocks — and more importantly bond yields — on Monday suggests investors are quickly moving beyond those relatively rosy views.

Of course, investors can be wrong. Markets often overshoot, ping-ponging between overly optimistic when times are good to downright despondent on the first sign that they might, well, not be. The truth is almost always somewhere in the murky middle, except when it isn’t.

U.S. stocks are set to open up slightly today, although European shares also started in the green before slipping into the red. Traders say they aren’t in “sell everything” mode — even if what passes for optimism these days are calls like those from Blackstone’s Byron Wien, who recently said, “I don’t think it’s the end of the world.”

• The only sure winners, the report predicts, are sector experts — think Silver Lake for tech or L Catterton for consumer — or mega-firms like Blackstone and KKR.

On CNBC yesterday, Warren Buffett told Andrew he would “have no trouble voting for Mike Bloomberg,” though he cautioned that support from a fellow billionaire might not help Mr. Bloomberg win the Democratic presidential nomination.

On buying Bloomberg’s company if the eponymous founder became president, Mr. Buffett — whose Berkshire Hathaway is sitting on $128 billion in cash and loves cash-rich companies with fat profit margins — didn’t mince words:

CNBC’s Becky Quick: If Michael Bloomberg becomes the Democratic candidate, would you consider buying his company?

Mr. Buffett: No. (Laughs.) I can give you a categorical answer to that.

Ms. Quick: Because of the price, because of …?

Mr. Buffett: There’d be somebody who’d pay more.

We threw out some names of potential Bloomberg buyers, including Mr. Buffett, in the newsletter last week … but that was before Mr. Bloomberg’s debate debut.

Fun fact: Mr. Buffett has finally traded in his flip phone for an iPhone, a sign of brand allegiance (in addition, of course, to his company’s $74 billion stake in Apple).

Deals

• HP plans to counter Xerox’s hostile takeover bid with a plan to buy back $15 billion worth of stock. (WSJ)

• Revolut, the popular British fintech start-up, has raised $500 million at a $5.5 billion valuation. (Quartz)

• SoftBank’s second Vision Fund has reportedly invested $100 million in Behavox, a compliance software start-up. (Bloomberg)

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