Coronavirus in Italy: Europe’s first big Covid-19 outbreak roils global markets

February 24, 2020, 1:06 PM UTC

Europe is suffering its first significant outbreak of the Covid-19 coronavirus, and markets are reeling.

The outbreak is in Italy, where the number of confirmed cases has shot up past the 200 mark—on Friday morning, there were only three. At the time of writing, five people have died from the coronavirus in the north of the country—the economic engine of Italy—all of them elderly.

In all, eleven Italian towns are in in lockdown. Austria briefly suspended rail travel to the region, and officials on the local and state level are scrambling to stop the coronavirus hitting major cities. Here’s what you need to know.

How did the coronavirus get there?

The first Covid-19 cases to be confirmed in Italy, almost four weeks ago, involved a couple of Chinese tourists who travelled to Rome via Milan. Italians are on edge. Although only a few cases manifested before last Friday, recent weeks have seen a spate of violence and verbal abuse against people of Chinese and Asian origin.

Now the spread of the virus has taken a turn for the worse, with the hardest-hit region being Lombardy, the capital of which is Milan. Cases have also been reported in neighboring Veneto, plus Turin and south into Emilia Romagna.

According to reports, the authorities think the virus may have been spread by a 38-year-old Unilever researcher who visited the emergency  room of an Italian hospital in Codogno. It’s believed the researcher then ran some races, infecting another runner, plus the Unilever employee’s wife. It is not, however, clear how he got the infection in the first place; he had contact with a man who had returned from China, but that man did not test positive.

What have the immediate effects been?

Codogno, the town where the first patient in the northern-Italian cluster was hospitalized, is on lockdown—as are more than 10 other towns. The authorities have moved on from looking for links to China. Now, the race is on to just stop Covid-19 spreading into Milan, the business capital of Italy.

Milan Fashion Week is going ahead—”We are tranquil and prudent,” said National Fashion Chamber president Carlo Capasa— but without Armani. The fashion house opted to livestream its Sunday show instead. “The decision was taken to safeguard the well-being of all his invited guests by not having them attend crowded spaces,” the company said.

Mido, the world’s largest eyewear show, was due to take place in Milan starting this weekend, but has now been postponed to late May at the earliest. Milan’s famed La Scala opera house has suspended performances. Schools are closed throughout Lombardy for a week, as are universities, museums and cinemas. High-profile soccer matches have been cancelled (sending club Juventus’s stock down by 9.6%) and churches have even cancelled Mass.

Over in Veneto, organizers of the Venice carnival cut the festivities short on Sunday—the carnival was only due to end Tuesday.

The timing is particularly difficult as Italy, the eurozone’s third largest economy, remains on the brink of a downturn and the government in Rome is beset by in-fighting. Italian fourth quarter GDP clocked in at zero growth, and there’s been little consensus how to revive growth.

What has the reaction been outside Italy?

Italy’s neighbors are considering instituting border controls—a huge deal, given that those neighbors are all part of Europe’s Schengen Area, through which people can travel freely. In any event, keeping Europeans confined to one spot will prove far more difficult than was the case in China.

Austria briefly suspended train travel into Italy, after some passengers heading in the other direction presented with fever symptoms. After the passengers tested negative for coronavirus, Austria reopened the Alpine Brenner Pass. But the Austrian authorities are assembling a taskforce to examine the question of border controls. Slovenia and Croatia, which lie to the east of Veneto, are also holding crisis meetings.

So far, France is officially holding off from closing its transport borders with Italy, on the basis that doing so would not stem the virus’s spread. However, bus passengers who arrived in Lyon from Milan were reportedly kept on board Monday, due to the hospitalization of the driver. A security cordon was set up around the bus at Lyon’s Perrache station.

Mauritian authorities, meanwhile, are also “holding” an Alitalia plane that arrived from Rome on Monday, preventing dozens of passengers from disembarking.

And the markets?

The markets are looking ugly on Monday. Italy’s primary stock market, FTSE MIB, was down 4.6% at the time of writing, and the pan-European Stoxx 600 was down 3.4%. Germany’s DAX is down 3.6%; the U.K.’s FTSE 100 off 3%.

Italy is of course not the only problem here. The South Korean outbreak is looking increasingly scary, as is the coronavirus’s spread in the Middle East. Iran has seen at least a dozen Covid-19 deaths, and the first case has been confirmed in Iraq.

The coronavirus’s effect on the tourist and travel sector is particularly pronounced.

In afternoon trade in Europe, EasyJet was down 13.6%, Ryanair 11.2%, Air France-KLM 9.4%, Lufthansa 6.7% and International Airlines Group (the parent of British Airways and others) 8.6%. The German event-ticketing giant CTS Eventim is down 10.6%.

The latest outbreak is hitting global markets, too. Futures indicate the Dow Jones Industrial Average will open down a whopping 744 points. The Nasdaq could fall by an ever greater percentage.

More must-read stories from Fortune:

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—In China, oil won’t be the only energy sector battered by the coronavirus
Coronavirus misinformation is fueled by government mistrust in China
—Coronavirus may be the straw that breaks the back of oil fracking

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