If President Trump’s speech from the Oval office last night was intended to reassure markets that the US administration was on the ball when it comes to dealing with COVID-19 in the US it missed the mark by a mile. If anything, it spoke to a US administration in denial about the challenges being faced within the US as the President imposed a 30-day travel ban, starting on Friday, on all incoming flights from Europe, with the exclusion of the UK and Ireland as they are outside the Schengen travel area.

The President’s speech came within hours of the World Health Organisation succumbing to the inevitable and declaring coronavirus a global pandemic.

Unsurprisingly financial markets have reacted badly to last night’s Presidential address, despite the speech containing some announcements of fiscal measures to aid US businesses.

Sadly, they don’t appear to go far enough, and there also appears to be little consensus between Democrats and Republicans as to the extent of additional measures to help the US economy, even though the President did announce some measures to defer tax payments ahead of the US April tax filing deadline. It would appear that measures to combat the spread of the virus are running into partisan battles within the US Congress, an unforgivable state of affairs at such a critical time for not only the global economy, but also the US economy. While the world is looking for leadership from the US, their politicians appear to be fighting like rats in a sack.

Cases in Europe have continued to rise and this appears to have prompted the Italian government to announce a complete lockdown, which suggests that further lockdowns across Europe could well be coming. Reports out of Switzerland suggest they could well follow, and if taken to its logical conclusion could lead to lockdowns across Europe.

Against this backdrop markets in Europe have taken their cues from an ugly Asia session opening sharply lower, with oil prices also falling further as they head back towards their lows this week, there is a concern now the current declines are gaining a momentum of their own which could well be difficult to arrest in the short term.

The travel and leisure sector have once again borne the brunt with airlines falling heavily again with more heavy declines for Ryanair, and Easyjet, while British Airways owner International Consolidated Airlines is also sharply lower. In Europe the losses are even worse with Air France KLM and Norwegian posting larger percentage falls, over concerns about the durability of its balance sheet.

The woe for the travel sector is likely to be been compounded by speculation that the UK will probably move to the next phase of its coronavirus action plan which could mean the introduction of temporary bans on large scale gatherings and the closure of schools and colleges. This is likely to mean the postponement of large sporting events which in turn would hit the companies like Premier Inn owner Whitbread as people travel less to large sporting events around the country as well as the possible postponement of Euro 2020.

WH Smith is also lower given its presence in transport hubs across the UK, Europe and globally. Today’s trading update was fairly positive in terms of revenue growth, however it’s the outlook that concerns most investors. In Asia pacific there has already been significant impact on its business, which if extrapolated across the rest of the business means the potential for large scale reductions in revenue forecasts. For the UK management expect a 15% reduction in revenues for the first six months of the year, while in the US that rises to a 20% fall.

In company news there’s more woe for Cineworld with the shares sliding to new multi-year lows after preliminary full year results showed that full revenue declined from 2018. This was largely expected, however with population lockdowns starting in Europe the main concern is that similar actions here in its UK and US markets could well impact its revenue outlook for the next 12 months, as well as potentially threatening its ability to do business. Any business that relies on consumer spending as well as footfall, is likely to have to gear up for a very difficult year, which makes yesterday’s measures announced by the Chancellor of the Exchequer to help businesses all the more important.

In a trading statement released this morning house builder Berkeley Group appears to have acknowledged this new uncertainty by saying that it was suspending £455m of returns to shareholders to cushion its balance sheet, not because trading is slow, but to build up a cash buffer in the face of rising uncertainty. Management have said trading is in line with expectations.

BP is also sharply lower on the back of further oil price weakness

Contrasting the current US response to the UK response yesterday is almost chalk and cheese, with the UK government appearing to be setting a template for how to react to the current crisis on a fiscal level, with a series of measures outlined in yesterday’s budget.

All eyes now turn to the ECB later today against a worry that they have very limited scope to act further, given the parlous state of Europe’s banks. Christine Lagarde may struggle to get consensus on more than very limited measures. The days of shock and awe of the Draghi era seem a distant memory, with more rate cuts likely to do more harm than good.

US markets look set to plunge further on the open as financial markets absorb last night’s US Presidential press conference.

In earnings news we get to hear from Gap’s latest numbers. While the US consumer has by and large been in fairly confident mood some retailers have continued to struggle. Gap is one of these retailers with its share price at ten year lows as it struggles to adapt to a changing retail climate. At the end of last year CEO Art Peck announced he would be stepping down after the company cut its earnings forecast for this year.

The company cut its full year earnings to $1.70 to $1.75c a share, from over $2. It is still looking to spin off its better performing Old Navy brand at the expense of Banana Republic in an attempt to stem the bleeding. It faces an uphill task after Q3 profits fell 47% to $140m, from $266m. Expectations for Q4 are for $0.41c a share.

The reality is that even with widespread fiscal measures the economic damage of the virus cannot be avoided, it can only be mitigated, which means investors need to adapt to the reality that there will be economic damage whatever happens now. The only unknown remains how much damage, and how well any fiscal response mitigates it.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.