Global stock markets remain volatile due to coronavirus infection spreading from China to other countries in Asia, Europe, and the United States.
More than 92,000 Coronavirus cases (also known by the COVID-19) were confirmed in the world as of March 3, 2020. There have been more than 3,100 deaths. The virus is thought to have originated in Wuhan, China and has since spread to many countries around the world. It has claimed multiple victims. Indian infected patients were also detected.
Although the disease has had a negative impact on public health, much has been said about its potential impact on stock markets worldwide. While health officials are working overtime to control the disease, many factories have closed, businesses have been affected, and companies have adjusted their annual profit estimates to account for the virus's impact. Economists also predict a decrease in the global economy's growth. According to the Organisation for Economic Cooperation and Development ( OECD ), the global economy may grow at the slowest rate since 2009 because of the coronavirus epidemic. The 2020 growth forecast is only 2.4%, a drop from 2.9% in November 2017. It has been predicted that an even more severe outbreak could reduce the growth rate to 1.5 percent. The global stock markets have felt the effects. Let's look at Coronavirus, and how it has affected global stock markets.
In the past few weeks, global stock markets have been volatile. People initially ignored the effects of the virus, but this changed when it spread to Europe, the United States and the Middle East. The DOW closed on February 24, th at over 1,000 points lower, making it its worst day in the past two years. Also, the S&P 500 index fell sharply. Analysts warned that the coronavirus epidemic could bring down economies across the globe. Moreover, European markets saw their worst session since 2016 while major benchmarks in Asia showed signs of slowing.
After two coronavirus cases in India, the Sensex fell 1,300 points. As the disease spreads, it is likely that there will be more turmoil. The virus has made Italy, Iran, and South Korea new hotspots for the virus. This will cause economic activity to slow down further.
Investors around the globe are worried about the impact of the coronavirus on global stock markets. To understand this effect, it is necessary to first evaluate its impact on China's economy.
The impact on China's economy: China is the second-largest country in the world. Any effect on China's economy will have ripple effects all over the globe. The Chinese government has taken severe measures to stop the spread of the virus since it broke out. Major corporations have slowed or stopped production in many major cities and provinces. The coronavirus epidemic caused China's factory activity to contract at its fastest rate ever recorded in February. This brings into sharp focus the extent of the damage done.
China's GDP growth will slow in Q1 2020, to its lowest point since 2008 due to the spread of the virus. China's economic growth is expected to slow to 6% for the entire year. Much will depend on how the virus plays out. The virus can be contained quickly, so the effects will be felt most in Q1 and then diminish in Q2. If the infection isn't contained quickly, the impact will be felt most in Q1 and will diminish in Q2. However, overall economic growth may drop to 5- to 5.5 percent if it isn't. China's government announced several measures to boost its economy. These include stimulus packages, tax waivers, and lower interest rates for medium-term loans. Supply chain disruptions will have a significant impact on industries around the globe, as China is a major manufacturing center. Industries such as pharmaceuticals and automobiles will be most affected.
Back to track:Over these last few days, both the number of deaths and new cases in Mainland China have been declining. This indicates that the virus's impact may be at its peak and that things could improve in the coming weeks. After the prolonged slowdown, a large number of workers are gradually returning to work, particularly in those provinces not affected by the virus. The recovery process is likely to take longer due to government restrictions, logistical issues, and other factors. The 2003 SARS outbreak taught us that manufacturing can rebound only if it is controlled quickly. The impact of Coronavirus will be greater as the disease spreads faster and China is now more connected to the global economy than 2003.
The crisis is being addressed by the central banks: The US Federal Reserve announced a cut in the emergency rate on March 3rd. This was the first time the US had cut its emergency rate since 2008's financial crisis. Although the markets rallied following the cut, they fell soon afterward as investors realized that a rate reduction might not be sufficient to protect the US economy against the Coronavirus. The Reserve Bank of Australia is also expected to cut rates to help mitigate the effects of the crisis. The World Bank has committed $12 billion to an emergency fund, which includes grants and loans at low costs. It is expected that this will help countries improve their public healthcare systems' response to the crisis. The private sector can also be involved in reducing the economic impact. These measures could reduce the impact of the virus on markets and the economy.
Moving on: With all these developments, it is difficult to predict the impact of Coronavirus on global share market markets. Because there is not enough information about how the virus will spread, this is why it is difficult to predict the impact on global share markets. It's also not clear how governments around the world will respond to the virus. The financial sector's reactions are uncertain as well. However, stock markets around the world may continue to be volatile in the short- and medium-term.