Despite signs that the Chinese economy is sputtering back to work, market fears about coronavirus (COVID-19) have escalated on signs that the disease is getting a foothold in new hotspots.
The Australian and New Zealand stockmarkets yesterday followed Friday's fall on Wall Street - dropping nearly two per cent.
Prior the start of this week markets had largely shaken off fears of economic fallout from disruption to Chinese trade.
But worries about potential escalation of the outbreak in South Korea and Italy have prompted investors to go on the defensive, with the next two weeks looking key to whether a global pandemic can be avoided.
The South Korean (Kospi) stockmarket index plunged more than 3 per cent on news of a big rise in cases in the country.
Wall Street followed last night with similar falls in excess of three per cent.
Some of the world's largest economic research units, including the IMF, S&P and Moody's have now downgraded their global economic outlooks for the full year.
China's economy is actually starting to pick up again as people head back to work after the extended New Year break, but it is still operating well below normal levels.
Bloomberg economists David Qu and Chang Shu say China estimate it's now running at 50-60 per cent of its normal level, up from 40-50 per cent a week earlier.
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They say they expect to see a big jump in output this week as two-week quarantines for people who travelled over the extended Lunar New Year holiday start to lift.
The base case for most economic outlooks has been for a v-shaped event, with a short sharp shock largely confined to the first quarter of the year and a strong rebound.
But following the weekend meeting of G20 of finance ministers in Saudi Arabia, International Monetary Fund (IMF) cut its forecast for Chinese growth to 5.6 per cent from 6 per cent for 2020.
It also cut 0.1 per cent from its global growth forecast. It had previously been forecasting 3.3 per cent global growth, up from 2.9 per cent last year.
The IMF said it was also considering more extreme scenarios.
Ratings agencies such as S&P Global and Moody's are more pessimistic and have cut global growth forecasts more dramatically.
S&P Global has cut its outlook for 2020 China's GDP growth by 0.7 per cent to just 5 per cent.
It lowered and global growth by 0.3 per cent but warns the impact will be felt more acutely through the Asia Pacific region.
"Disruption in China will flow to Asia-Pacific through four channels: people flows, supply chains, goods trade, and commodity prices," according to S&P Global Singapore based analyst Shaun Roche.
"Hong Kong and Singapore will be hardest hit. Australia, Taiwan, Thailand, and Vietnam should suffer a material knock to growth. Korea is especially vulnerable to supply-chain disruption."
He said his base-line was still for a temporary shock but warned that "prolonged disruption into the second quarter would tip the region into recession, stress corporate cash flow and have substantial credit implications."
Moody's has lowered its China growth forecast to 5.2 per cent for 2020 from 5.8 per cent.
It has dropped its growth forecast for the G20 economies to just 2.4 per cent lower than last year.
It warns "reduced Chinese demand for Asia's exports and supply chain disruptions represent the two most direct transmission channels for slowing economic growth, although services trade adds a third channel."
"As such, goods and commodity exporters are most exposed to a protracted fall in Chinese demand, while tourism hubs that rely on Chinese visitors will also be vulnerable."
After the G20 meeting IMF managing director Kristalina Georgieva called for increased international cooperation on control on the outbreak.
"COVID-19 is a stark reminder of our interconnections and the need to work together. In this regard, the G20 is an important forum to help put the global economy on a more sound footing.