Pictures of air travellers in face masks filing past body temperature scanners are the last thing world markets needed right now. 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 September 11 2001 attacks.

The nightmare scenario, once again, is that Mexican swine flu succeeds where Sars and avian flu failed, and becomes a global pandemic. The impact on a world economy already set to shrink this year would be devastating. The World Bank estimates that a pandemic on the scale of the 1918-19 Spanish flu could kill tens of millions and reduce global output by 5 per cent.

Swine flu has shown an alarming capacity to spread between humans. Its mortality rate, however, is unclear, with cases outside Mexico relatively mild to date. That suggests it may yet stop short of becoming a global killer. If so there are some small comforts for investors. Sars infected more than 8,000 people and killed more than 900, but had relatively localised economic effects. Its impact on tourism and air travel knocked back the Hong Kong economy in the second quarter of 2003. But annual economic growth bounced back to 3 per cent. Annual Chinese economic growth was also little affected.