Ritmbarah Arora
The coronavirus outbreak that causes the disease COVID-19 has created upheaval worldwide. This has impacted the world on a global level, forcing the World Health Organisation (WHO) to announce a global pandemic. Until now, WHO was avoiding use of the term to limit panic across countries. But, with the spread of the virus in over 100 countries and after the confirmation from epidemiologists for weeks, WHO acknowledged that the world is in the grip of a fast-spreading illness. While 80% of cases are mild, governments worry about the impact of the virus on elderly and sick populations.
A quick update on global stock market shifts in response to the coronavirus
- After Wall Street faced its biggest drop in the opening session of Friday since the Black Monday crash of 1987, shares with benchmark sank around 10% in Japan and Thailand in early trading
- Trading was halted temporarily in Bangkok and India. When trading resumed, India's exchange jumped and moved into the green.
- London's FTSE is up 2.4% (Still open)
- Australia’s S&P/ASX 200 rose 4.09%,
- Japan’s Nikkei fell 4.5%, approaching a bearish market
- S&P 500 (SPX) plummeted 9.5%
- Nasdaq futures decreased 3.9%
- Hang Seng Index of Hong Kong fell 1.14%, prompting an entry towards a bear market zone
- The Shanghai Composite Index dropped 1.3%
- The global oil benchmark, Brent crude futures sank 4.1%
- Dow Jones Industrial Average fell 9.9%
- Brazil Bovespa sank 21.3%, and President Bolsanaro has been diagnosed with coronavirus
- Germany's DAX dropped 10.9%
A shadow over the world economy
The epidemic has not only impacted the health of the people but also the economy globally. Market volatilty is only the most obvious signal - for the first time in 12 years, the Indian stock markets halted trading reaching to a three-year low since 2009. India’s main Nifty 50 stock index paused trading today after it slipped 10% and hit a ‘circuit breaker’. Trading resumed after 45 minutes.
According to stock exchanges data, foreign institutional investors (FII) sold equities worth Rs 3,475.3 crore on Thursday, March 12 on a net basis. The panic over coronavirus led to a loss of 10% for Wall Street which is the worst session since 1987 while Frankfurt observed a similar record since 1989. Japan’s Nikkei index also lost 4% because of the financial toll.
With more than 1,300 cases reported in the United States and around 37 deaths, President Trump ordered a ban on travel from Europe for 30 days. The fall of global markets is signalling a recession is likely.
Ben May, head of global macro research at Oxford Economics said in a report, “From an economic perspective, the key issue is not just the number of cases of COVID-19, but the level of disruption to economies from containment measures”.
Impact is being felt across sectors
- Major institutions and banks cut their forecasts for global growth: This has caused a plunge in the stock prices and bond yields.
- Major manufacturing sectors suffer: With the breakout of the epidemic, major manufacturing sectors have been impacted. Majorly, the manufacturing industry of China has been hit adversely knocking the economies of other countries as well.
- Fall in oil demand and price: The weak global activity led to a fall in the demand of oil which eventually brought down the oil prices to multi-year lows, as a price war brews between Russia and Saudi Arabia.
