Swine fever claims more business victims

As swine fever claims more than a hundred victims in Mexico and spreads across more countries, global markets have seen further declines. After an initial sell-off in the more obvious candidates for downgrades over the effects of swine fever - hotel groups and airline and holiday companies like British Airways, TUI Travel and Intercontinental - the markets are now discounting the negatives on business more widely.

Mining shares were the latest sector to feel the effects of the illness as it gathers momentum and approaches pandemic proportions. The prices of commodities such as copper have been hit as analysts downgrade global growth forecasts and as a result the miners were sold off.

Xstrata was down ten per cent for much of the day yesterday and Rio Tinto closed down more than five per cent. Meanwhile food firms such as Cranswick, which has recently acquired a supplier of pork to Tesco and other meat companies have continued to decline.

Instead investors have been opting for the safety of gold, pushing it to its highest level for nearly a month and underlining its traditional reputation as a safe haven investment. There have also been plenty of buyers for drug stocks.

GlaxoSmithKline shares have soared on its flu drug Relenza, which investors are speculating could be stockpiled by governments seeking to stem the spread of swine fever. And Roche has seen rises too, with buyers betting that its Tamiflu drug would see a big pick-up in sales as a result of its benefits for sufferers.

Until the disease reaches its peak it is likely the pharmaceutical companies will continue to benefit even as falls continue right across the markets.

WHAT THEY ARE SAYING
Lex, Financial Times: "Pandemic scares have an unfortunate habit of looming just when investors are regaining a bit of confidence after a financial shock. Severe acute respiratory syndrome, or Sars, struck in early 2003, as markets struggled to recover after the bursting of the tech bubble and the attacks of September 11 2001."

HSBC analysts quoted in the Guardian: "Whether investors take money out of the market here will depend, among other things, on their confidence in their ability to call the severity of the outbreak, and/or other investors' responses; and on whether they see a secular bear market continuing, and so are predisposed to sell the rally anyway. Airlines, hotels and leisure stocks are already being hit, and pharmaceuticals are rallying, some of the potential bad news is being priced-in. In 2003, the worst news on Sars didn't prevent the global market from rallying."