The novel coronavirus, COVID-19, has caused a lot of turmoil in global markets since its first emergence in Wuhan, China. The global epidemic caused commotion around the world – people started panic buying, companies quarantine their staff, and many global supply chains have been halted.
Monday, March 9th, 2020, was a devastating day for the US stock market. Just a few minutes into the USA trading day, the plunge is the S&P hit 7%, which automatically forced trading to be ceased for 15 minutes. Asian indices like HKGTO, JPN225, and China 50 dropped 5%, while Bitcoin’s price went to as low as $7000; other crypto coins followed. European stock suffered too: The GER30 finished down 7.94%, the UK100 closed 7.69% lower, and the FRA40 fell 8.39%. The sharp stock decline forced a circuit breaker to be implemented in order to curb the panicky selling that came into effect.
On March 10th, oil rebounded almost 10% following the crash on Monday – such prices have not been seen since 2016. Italy announced a country-wide restriction on traveling across the entire country as the government battles the outbreak. Furthermore, Italy forbade all public gatherings like weddings, funerals, and sports events. Public places like theaters, gyms, ski resorts, and nightclubs were all such until March 15th. On Monday evening, Italia Prime Minister Giuseppe Conte said that he would extend the lockdown for a full month until April 3rd. The number of cases in Italy has surpassed 9000 people, and as many as 450 people have died.
Despite a strong start to 2020, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all dropped by over 10% in the past 30 days.
Financial markets witnessed major volatility with large price swings that are happening daily. Traders are recommended to take special care by reviewing their stop/loss levels and monitoring their positions regularly. Of course, as in every volatile market, we witness investment opportunities in various industries that were, as tragic as it is, positively affected by the outbreak. Stocks that remained unaffected include Netflix (NFLX), Tesla (TSLA), and Google (Google). The big Pharma industry also saw growth, with Pfizer (PFE) increasing by 4%.
Richard Kozul-Wright, Director, Division on Globalization and Development Strategies at UNCTAD, envisions that there will be a slowdown in the global economy to under two percent for this year,” versus what was forecasted in early September. Mr. Kozul-Wright expressed worries that most countries will suffer the economic implications caused by the virus. While it’s difficult to predict how the coronavirus will impact global markets, the reactions we have seen recently seen that worldwide panic is causing significant damage.
“Governments need to spend at this point in time to prevent the kind of meltdown that could be even more damaging than the one that is likely to take place over the course of the year,” Mr. Kozul-Wright insisted.
While many believe that the exaggerated panic from the media is worse than the actual virus itself, Tedros Adhanom Ghebreyesus, World Health Organization (WHO) head, believe that COVID-19 is becoming an official pandemic “has become very real”. At the same time, WHO believes that panic is not the solution and that people should continue following precautions sanctioned by their governments to help contain the infection.