Business Editor at Large Liam Dann talks about the Reserve Bank's OCR announcement.
COMMENT: Stockmarkets have slumped, with Wall Street down more than 3 per cent overnight - and the local NZX-50 also sliding over 3 per cent after opening this morning.
It now looks like a coronavirus correction is on the cards - finally.
In what now looks like irrational exuberance, markets around the world - including the local NZX-50 - ploughed on to fresh record highs until last week, even as the number of coronavirus cases mounted.
Now as the reality that this is a global issue - not just one for China and Chinese trade - we get the panicked sell-off.
The falls of around 4 to 5 per cent (in the past couple of days) are far from catastrophic.
The S&P 50, for example, is down 4.75 per cent since it hit a record high last Wednesday.
That has erased all of February's gains. It's still a blip on the mountainous bull-market which defined the past decade for investors.
But why the sudden shift? Coronavirus outbreak was worrying last week and it's still worrying this week.
A spike in cases in South Korea and Italy means new hotspots and new travel concerns.
Ultimately though the situation remains highly uncertain and difficult to forecast - as it has since the beginning.
It might have been helpful if equity markets had reflected that and tracked sideways through the uncertainty.
But it never works like that. As the old adage goes, it's fear and greed that drive stock markets.
Local markets have followed global stocks down. Photo / File
More volatility seems highly likely.
As a barometer of how serious the coronavirus impact on the world economy is likely to be - or at least as a best estimate based on the latest data - commodity markets and bond markets are a better focus.
Neither is looking particularity pretty after the developments of the past few days, but they've more accurately reflected the risk throughout the outbreak.
The yield on the safe haven of US 10-year Treasuries has touched a three-year low.
Crude prices slumped 3 per cent reflecting likely lower global demand.
Neither yet suggests global financial crisis levels of panic.
The world economy is a big place and outside of disruption to industries like aviation and tourism, the outlook remains far from apocalyptic.
Following the weekend meeting of G20 of finance ministers in Saudi Arabia, the 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, but it's worth noting they are still far from talking about global recession.
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.
Moody's has lowered its China growth forecast to 5.2 per cent for 2020 from 5.8 per cent.
