” This is a term that is pronounced with fear around the globe. This deadly and frightening viral outbreak has brought chaos everywhere. It is safe to say that this is the most significant and worst global disaster of this decade. Starting from Wuhan city of china and then a horrific expansion in other parts of China resulted in the deaths of thousands of Chinese and colossal numbers were affected by Coronavirus (COVID-19). Well, things didn’t end here, and the virus kept hunting humans, and it became extremely difficult to contain the virus, and it started spreading all over the world. In this article, we will see COVID-19 Impact On Financial Markets.
Now, it has spread over almost everywhere in the world, affecting Asia, Europe, Australia, Middle East, as well as America. After China, Italy is the second most affected country right now. In fact, it has surpassed China in terms of casualties. This is posing a severe threat to all of Europe, which contains some of the strongest economies of the world, including Germany, England, France, Norway, Switzerland, etc. and do not forget Italy itself is one of the stronger economies of Europe. Right now, almost all European countries are being affected by the corona outbreak. Countries are imposing lockdowns to avoid the further spread of the virus.
Affecting the United States of America:
Where everything is turning to uncertainty, coronavirus has also hit the United States of America and other countries in its surroundings as well. Many states have imposed a “lockdown” situation in the United States, and people are virtually forced to stay at homes, and “working from home” concept is introduced as camouflage to cope with the situation.
What actually happened?
Well, if you don’t know, let it be broke like this! China happens to be the second biggest economy in the world, just falling behind the United States of America. China has penetrated almost every global market. Chinese products and services are used in many countries all around the world. This outbreak, without any doubt, has affected the Chinese markets significantly. The story didn’t end here, because, a drastic event in Chinese markets meant a negative impact on the global economy as China is one of the biggest importer and exporter to many countries at the same time. It imports agricultural products, Liquefied Natural Gas (LNG), metals, and oil in giant quantities. As a matter of fact, China holds the position of being thebiggest importer ofoil, which constitutes almost ten percent of the global demand for crude oil.
As a matter of fact, China was importing 10.1 mm b/d until December 2019, but due to the virus outbreak, this figure has fallen to 7mm b/d since January 2020. This has affected the demand and supply equilibrium significantly, and Fatih Birol from The International Energy Association has stated that demand for oil in 2020 will hit the lowest point since 2010. On the other hand, China is one of the biggest suppliers of the material. Uses in the production of the batteries. Not only this, but China is also famous for providing cheaper and high-quality products. Well, this can easily give an idea of how much importance china holds in the current world economy.
What is actually happening Right now?
At the start of this outbreak, there was no significant impact on the financial markets. Because there was no bright and vivid information about the matter. So, nobody knew how long it would take for the Chinese government to deal with the problem. But, as soon as it started expanding. Stock markets began to feel the jolts, and by the end of February 2020. These markets around the globe had suffered heavy losses reaching up to trillions of Dollars ($). Statistically, it has been the worst time for stock markets. Since the great 2008 financial crisis.
Moreover, United States Federal Reserve announce the interest cut rate to 50bps. Although this cut is very much on the cards. It is not expects to this extent. Mind you; this is the largest cut since the 2008 financial crisis. Not only this, President Donald Trump has stated that more cuts are also under consideration.
Demand for the oil:
Now, as stated earlier, China is the second-biggest economy of the world as well as the largest importer of the oil. Chinese imports and exports is significantly disturb by this outbreak, and the overall demand for the oil reduce severely. But, the OPEC (The Organization of the Petroleum Exporting Countries) failed to see that earlier. However, in light of the recent events, OPEC finally decided a 600K b/d cut in the total production. Oil markets are facing a decline since then. Hence, it expects to continue this way. Unless there are some robust actions are taken.
Now, it is essential to understand that if this thing keeps going this way, it can bring another massive economic recession across the globe. Talking about oil markets, if things keep on going with the same pattern, oil prices will keep falling, and it may reach lesser than $30/barrel just like 2015.
What can happen in the future?
How it can Affect Asian stock markets? With the economies struggling and international trade affects severely. Things do not seem to be very promising. Unless this outrageous virus is put to halt. This global disaster has also affected the global stock markets as well. It is very evident that china suffer greatly in this outbreak. But other strong Asian economies also affects by this outbreak. Japan was sailing across with ease and strength as far as the stock market is concerned, but this outbreak has definitely dented the progress. What made the situation worse is that the 2020 Olympics are around the corner, but this situation has jeopardized the smooth arrangement of this global event as well. If things go from bad to worse and the Olympics cancels, this will act as a “low blow” to the Japanese economy Deloitte .
Talk about South Korea;
Coronavirus has not spared the South Korean people as well. This has made a significant impact on the Korean economy, as well. Keep in mind that South Korea is also a strong market place for oil and natural gas trading. Here are some factual figures that will further elaborate on the financial market conditions in Asia:
- Asian stocks suffered terrible losses after this outbreak.
- Shenzhen stock hits by significant losses across all markets in the region.
- A reduction of 3.71 percent hit the Shanghai composite.
- The Hang Seng index of Hong Kong is down by 2.42 percent.
- 3.67 percent reduction in the Nikkei 225.
Well, it is evident that things are not looking promising for the Asian stock markets. So, it can get from bad to worse if the matter is not handle timely. No one has any doubt how it can affect the global economy as well. Chinese stock market mainly consists of retail investors. They are dominating the stock market by holding the ¾ portion of the market. But, with the current situation, it has become tough for the investors to operate in full capacity. Hence, this can definitely expose the stock market to further volatility. Thus, making the matters even worse.
COVID-19 and US stock market:
The US stock market is also facing tough times since this coronavirus outbreak. The last few days of February 2020 witnessed a severe decline in the United States stock market. Now, one might be wondering that the US stock market also faced ups and downs in recent years as well. But this time, it is different, and matters are getting worse and worse.
The matter which needs immediate attention is how this problem is going to affect. The revenues of companies that are register in US indexes. The United States is also a major importer, and it exports to many strong Asian economies. With this uncertainty caused by the corona outbreak, things are looking very shaky for the future as well. Although the Feds have announced interest rate cut. Yet, the things are not looking promising. Because this can only help to make things better in the United States. But this option will not be very helpful as far as global trade is concerned.
During this outbreak, the United States stock market suffered a loss of $3.5 trillion. Which is approximately 12%, and this is huge. Moreover, Dow Jones also experienced a reduction of 12%. Things are not looking good as far as the US stock market is concerned. Hence, it will only become worse if the matter is not solved in the near future WORD ECONOMIC.
The oil market has an undeniable impact on the stock markets all over the world. So, global stock markets are facing a huge threat. China being the largest importer of oil, can have a significant impact on this matter. Moreover, many European economies are at risk, as well. Right now, Italy is suffering badly at the hands of coronavirus, and things are getting bad to worse. It is not rocket science that if European economies started crumbling. A global recession is always on the cards, and it will affect every single country in the world.