Coronavirus pandemic brings pall of gloom on World markets

The declaration of a pandemic by the World Health Organization has plunged the US stock markets into bear territory. The Dow Jones Industrial Average dipped 5.9 percent, a fall of almost 20 percent from last month. This plunge stopped a bull run of nearly 11 years. The broader S&P 500 fell 7 percent after opening bell, triggering a halt of almost 15 minutes in trading. It ended the day at a loss of 4.9 percent, stopping just short of a bear market ( for that stocks need to fall 5 percent). The Nasdaq Composite went down by 7.5 percent, and if the day ends in this region then the tech-heavy index will also end in bear territory.

 

This bear run was a fallout of the declaration of the coronavirus as a pandemic by the World Health Organisation and the White House’s decision to ban non-US citizens from Europe for 30 days, the cancellation of the NBA league, and the shutting down of schools and colleges in fear of the spread of the virus. “Last night we had so many things hitting us all at the same time,” said Tim Courtney, chief investment officer of Exencial Wealth Advisors, reports the Wall Street Journal. “With so many larger organizations and larger pieces of the economy now changing, it looks like life is going to be different for the next 30 or 60 days.”

Wall-Street-US-Stock

“It’s hitting home now in a way that it wasn’t a few days ago,” he said. Further adding to the plunge was a sharp fall of 18 percent in Boeing’s stocks on news of it calling in the full amount of a $13.8 billion loan, raising concerns about a credit squeeze. Blackstone, the private equity group, also advised its subsidiaries to tap all credit lines to avoid any cash flow problems. The tumbling oil prices and the decreasing Treasury yield to 0.794 percent have further added to the woes. Brent crude fell 7.1 percent to $33.26 a barrel.

Goldman Sachs predicts a prolonged bear run by the middle of this year and predicts that the S&P 500 will drop down another 15 percent from the present level and it expects there will be a cumulative 28 percent drop from its last peak. “Both the real economy and the financial economy are exhibiting acute signs of stress,” Goldman said.

 

The European bourses were prevented from a similar free-fall by the quick actions of the central banks. The Bank of England brought down the interest rate by half a percentage point to combat the impact of coronavirus. Still, the FTSE fell by 1.4 percent by the end of the day despite this action by the BoE. The Europe-wide Stoxx 600 fell steeply. There are fears that long term funds will see redemptions, which will further push down the bourses.

 

Elsewhere, Tokyo’s equities benchmark Topix fell by 1.5 percent. Australia’s S&P and ASX saw a 3.6 percent plunge. Hong Kong’s Hang Seng went down by 0.6 percent, and China’s CSI dropped 1.3 percent. Global growth will see a downturn with most corporates already announcing the next two-quarter expectations to be low. The ISH Markit has also brought down its forecast for this year to 1.7 percent. Research says there will be zero growth in Europe, and the Asia Pacific region will also see a downturn with not much growth expected although it put China at 4.3 percent.

Avatar
Anna Domanska
Anna Domanska is an Industry Leaders Magazine author possessing wide-range of knowledge for Business News. She is an avid reader and writer of Business and CEO Magazines and a rigorous follower of Business Leaders.

Recent Posts

Store Closures Cost European Retail Giant Primark $1.43 Billion in Sales

Store Closures Cost European Retail Giant Primark $1.43 Billion in Sales

The European retail giant Primark said the COVID-19 had caused a loss of over $1.43 billion (£1.05 billion) in sales from store closures. T...
1 day ago
Goldman Sachs to concentrate on consumer banking arm Marcus for growth

Goldman Sachs to concentrate on consumer banking arm Marcus for growth

Goldman Sachs Group Inc. is firming up plans to bolster its consumer banking arm Marcus through acquisitions and concentrating on digital ba...
1 day ago
General Electric claims Siemens Energy used stolen theft secrets to win contract bids

General Electric claims Siemens Energy used stolen theft secrets to win contract bids

General Electric Co. has accused rival Siemens Energy AG of using stolen trade secrets to rig bids for lucrative contracts supplying gas tur...
2 days ago
U.S. Trade Department Slams Digital Services Tax

U.S. Trade Department Slams Digital Services Tax

The U.S. Trade Representative on Thursday said that the Digital Service Taxes (DSTs) in Spain, Austria and the U.K. is unreasonable and disc...
2 days ago
Bitcoin volatility attracts regulatory attention

Bitcoin volatility attracts regulatory attention

Touted as digital gold, Bitcoins have seen some volatile action in the last few days, with the cryptocurrency hitting nearly $40,000 at one ...
2 days ago
Renault plans to overhaul brand with Renaulution aimed at cutting costs

Renault plans to overhaul brand with Renaulution aimed at cutting costs

Renault has come up with a new plan called Renaulution to turn around the fortunes of the car company by concentrating on value rather than ...
2 days ago