Investors growing wary of global outlook

August, the benchmark ASX 200 index fell 2.3 per cent yesterday as companies in the index shed $48.3 billion in value.

The index fell heavily at the open – quickly exceeding the 0.7 per cent slide signalled by futures markets – and lost more ground later.

It came after one of the world’s leading economic bodies, the International Monetary Fund, warned it would be “prudent” to prepare for a significant fallout from the outbreak of the COVID-19 virus.

IMF managing director Kristalina Georgieva said it marked a global health emergency, had disrupted economic activity in China and could put a recovery in global economic growth at risk.

“Above all, this is a human tragedy, but it also has negative economic impact,” she said.

Ms Georgieva said she had previously reported that “even in the case of rapid containment of the virus, growth in China and the rest of the world would be impacted”.

“Of course, we all hope for a V-shaped, rapid recovery – but given the uncertainty, it would be prudent to prepare for more adverse scenarios,” she said.

Last month, the IMF forecast the global economy would grow 3.3 per cent this year, up from 2.9 per cent last year.

Ms Georgieva said the IMF now believed the COVID-19 outbreak would cut China’s growth from a projected 6 per cent to 5.6 per cent – in turn cutting about 0.1 percentage points from global growth.

“But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted,” she said.

Early yesterday, the Aussie dollar hit a fresh 11-year low against the greenback of US65.85C. It was March 2009, in the thick of the GFC, when the currency last traded at such depths.