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Markets tumble on COVID-19 fears

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TSX in a tailspin: The benchmark S&P/TSX Composite Index fell over 700 points at one point on Friday, the worst intra-day drop since 2015, amid concerns about COVID-19’s effect on the global economy. Markets recovered slightly after the U.S. Federal Reserve signalled it would cut interest rates if needed. At market close, the index was at 16,263, a 2.72 per cent drop. 

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Worst week since 2008: Equities have shed a tenth of their value this week, their worst since the 2008 financial crisis. The Dow dropped 1,191 points Thursday, the worst one-day drop in history, and has already fallen another 357 points as of market close Friday. 

Tech hit hard: U.S. stocks including Alphabet, Apple and Microsoft have plunged this week. The last two firms have warned they won’t meet earnings targets as a result of COVID-19. Microsoft has already lost US$232 billion in market cap in the past seven days. The tech-dominated Nasdaq dropped precipitously before climbing in late afternoon to end the day with a 0.01 per cent increase. 

Canadian tech is no exception: The S&P/TSX Capped Information Technology Index, which tracks 16 of the country’s largest tech firms including Shopify, Lightspeed and BlackBerry, dropped over four per cent before ending the day with a 1.1 per cent increase. 

Worse than SARS: Canadian supply chains are more vulnerable to COVID-19 than they were to SARS. According to a new report from RBC, about 10 per cent of unfinished products used in Canadian final goods come from China, where manufacturing has quadrupled since the SARS outbreak. Canadian firms reliant on that output are struggling. The stock of car-parts maker Magna International, which employs 18,750 in China, has dropped about 14 per cent from a high on February 20. Canada Goose and Gildan Activewear, which rely on China for sales and manufacturing, respectively, have both dropped significantly this week. 

Smaller firms particularly at risk: Perrin Beatty, Canadian Chamber of Commerce president, said earlier this month that large Canadian businesses have learned lessons from SARS and diversified their supply chains, but that small- and medium-sized firms are at risk. Wuhan, which is under lockdown, is a centre for automotive production and also has factories for phones and television displays. 

Shopify cancels conference: The firm won’t host the in-person session of its Shopify Unite conference, which was scheduled to start on May 6 in Toronto. Last year, it hosted over 1,300 people from 50 countries. The move comes one day after Facebook cancelled its F8 conference. 

Exfo bucks trend: The Quebec-based tech firm, which offers auditing tools for fibre-optic service firms and has a factory in Shenzhen, is the only company on the S&P/TSX Capped Information Technology Index whose stock increased today. The firm was up 4.63 per cent at close. 

Bitcoin no safe haven: Bitcoin is down about 16 per cent since its peak on February 13, despite hopes from some that it would act as a counterweight to dropping fiat currencies. Investors turned to more traditional safe havens, including U.S. government bonds and the Japanese yen.

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