Markets fall as COVID-19 leads to “increase in recession probabilities”

Markets were mostly lower on Friday.

The S&P 500 fell 1.1 percent, the STOXX Europe 600 fell 0.5 percent and the Nikkei 225 fell 0.4 percent.

The Shanghai Composite rose 0.3 percent amid indications that the spread of the COVID-19 virus in China may be slowing but concerns about its spread elsewhere and the likely impact on the global economy kept markets down.

“The coronavirus outbreak contains a significant likelihood of impact to the global economy and the potential to become a black-swan type event,” warned Bank of America Global Research rates strategist Bruno Braizinha, in a note on Friday. “The uncertainty has been reflected in the market and has naturally led to an increase in recession probabilities.”

“Nobody has a really good handle on just what the impact is on supply chains,” said Luke Tilley, chief economist of Wilmington Trust. “It’s understandable that some investors are moving to a risk-off mode.”