Risk aversion dominated today’s trading after reports came out that coronavirus cases in China skyrocketed overnight. Major Asian stock indices were in the red while higher-yielding currencies like the Aussie, Kiwi, and Loonie were under pressure from sellers. EURUSD also dropped to its 2017 lows. On the other hand, gold price traded higher amid concerns that the coronavirus outbreak is getting out of hand.
According to officials, Hubei, China reported an increase of 14,480 cases on Thursday. This took investors by surprise because there were only 2,015 new cases reported on Wednesday–the smallest increase we have seen since January 30. The surge to almost 15,000 overnight, in contrast, was the largest single-day increase since the outbreak. Additionally, the death toll rose to 1,369.
Does this mean that the infection spread rapidly overnight?
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Despite clarifying that they changed their diagnostic methodology, the surge in the number of confirmed cases suggest that the Chinese government is struggling with containing the disease. Amid the staggering numbers, a number of key government officials just got fired!
Bringing in the Big Guns to Hubei
Hubei’s party secretary Jiang Chaoliang got axed today and was replaced by President Xi Jinping’s close ally, Ying Yong, who is also the mayor of Shanghai. The Communist Party Leader of Wuhan City, Ma Guoqiang, is also jobless now as Wang Zhonglin who is the party secretary of Jinan is set to replace him. They are the latest political casualties after a couple of Hubei’s health commission officials were fired earlier this week.
According to experts, this move by the central government suggests that the initial reaction to the outbreak was mismanaged. President Xi has said on Wednesday that the priority is “getting back in business.” Most Chinese cities are still on lockdown as the outbreak does not show any signs of stopping. The outbreak is costing the Chinese economy as factories remain closed, contracts cancelled, and manufacturing lines have non-existent. The appointment of Ying Yong and Wang Zhonglin is significant because aside from their reputation of being able to handle crises, they are considered as President Xi’s proteges.