Coronavirus. Pandemic. Locked down cities. Falling economies. Sell-offs. Panic Buying.
Aren’t these perhaps the only grim jargons you have been hearing, reading and talking about since at least the past couple of weeks? We bet you have!
Now that we have your attention drawn towards the same issues that are stealing headlines and need not only immediate attention, but action, let’s dive down the worries circling global stock exchanges catalysed by the virus that has shook us all alike.
After the close of the trade session on 19 March 2020, Australia’s benchmark S&P/ASX 200 settled at 4782.9, down by 3.4% or 170.3 basis points. All the 11 GICS sectors of the ASX closed in red, except the consumer staples (up by 0.9%), healthcare (up by 2.6%) and utilities (up by 3.1%).
The Reserve Bank of Australia (RBA) has agreed on a comprehensive package that will support jobs, incomes and industries as the economy deals with COVID 19.
Share Market Sentiments Hit Hard
Global share markets have been on a free fall, recording volatility unseen since the Great Financial Crisis of 2008 or as some experts opine, the 1929 Great Depression!
The Dow Jones Industrial Average crashed on 18 March 2020 by over 5% and so did the S&P 500. The Nasdaq dipped by over 4%. Even in Asia, Tokyo’s Nikkei 225, China’s the Shanghai Composite index, India’s Sensex and Hong Kong’s Hang Seng fell by an average of 1-2%.
The consistent slump indicates that investors are continuously worried about the fallout from the coronavirus pandemic and have been subsequently sending markets into a tailspin. Expected recessions, lower demand for energy and goods, liquidity worries in financial markets are subjects encircling investor minds before they decide to get going on the stock market in the current times.
Trading Halts- A Worry?
Not only are the markets experiencing sell offs as stocks hit hard from the COVID woes, trading halts have become an unsurprising situation. In the afternoon trading in the US market on 18 March 2020, the massive sell off that propelled the S&P 500 to drop over 5% and NASDAQ to over 4%, a trading halt was experienced for about 15 odd minutes, marking the second break in merely three days.
The large declines and market volatility is expected to occur in the event of such plunges. What’s worrisome is that this sets the tone for the remainder of the trade session, with stocks ending the session right around their lowest levels.
Governments and Central Banks in Action
The markets and economies are hit hard even after government stimulus package and central banks’ open market operations across the globe to aid economies reeling from virus outbreaks. For instance, President Donald Trump signed an aid package for sick leave to workers who fall ill, his administration briefed lawmakers on a program to ease the situation and the Fed announced moves to support markets.
RBA’s monetary policy initiatives are also complemented by the federal government’s latest pledge of allocating up to $15 billion to facilitate smaller lenders to resume supporting the nation’s small businesses and consumers. Government recently also announced $17.6 billion fiscal package to aid the recovery.
Medical Science Casting a Ray of Hope
Its not only the government’s financial aid that has acted as the silver lining amid the gloomy COVID clouds, medical science and researchers across the world have been thriving to develop a robust cure for the virus, and a few seem confident about its containment, if not eradication at this point.
For instance, WHO is all set to launch a multinational trial to search for coronavirus drugs.
Chinese specialists have proactively tested a Japanese drug which has reportedly shown efficacy in curing virus ailments with minimal side effects, as per their research.
Closer to home, in Australia, ASX-listed Biotron Limited (ASX:BIT) had its scientists as the firsts to identify and characterise a protein common to all coronaviruses. The Company, leveraging its biotechnology platform, is now focused on testing a select set of compounds they find fit, to ease the COVID 19 predicament.
On similar lines, NZ-based and ASX-listed Zoono Group Limited (ASX:ZNO) affirms that its Z-71 Microbe Shield was over 99.99% effective against the present virus, as suggested by laboratory-based tests
COVID 19 Story
Back in December 2019, they said it was a peculiar case of pneumonia. Little did these Chinese officials knew that they had reported a coronavirus case to the World Health Organisation!
With its epicenter in Wuhan City of China, the COVID 19 (the name given to the recent coronavirus) outbreak has over 218k confirmed cases globally and more than 8k deaths. According to a John Hopkins database, there have been ~81k recoveries (as on 19 March 2020), but are these enough given the rate at which the plague is spreading? This remains debatable.
The WHO has deemed the outbreak to be a pandemic, and this has further made economies and share markets nervous. Cities are locking down, there is a major impact on production activities, travel and tourism sector has plunged and investors have been noticeably nervous to invest their money in the market amid the panic, which has resulted into a series of sell offs.
Facts to be Wary About
No matter in which corner of the world you are, it is but obvious that you understand the bleak situation surrounding us as a global family. Adding onto your awareness, we present the below facts-
- According to The Organisation for Economic Co-operation and Development’s (OECD) Interim Report March 2020 which discusses the OECD Economic Outlook, slowdown in world growth is expected in the 1H20 as supply chains and commodities are hit, tourism drops and confidence falters.
- Global economic growth is seen falling to 2.4% for the whole year and expected to rise to a modest 3.3% in 2021
- Growth prospects for China have been revised down sharply to below 5% in 2020 after 6.1% in 2019
- Broader contagion across the wider Asia-Pacific region and advanced economies could cut global growth to as low as 1.5% in 2020
We should understand that it is important not to lose sight of the fact that we will come through this, and at some point, says Mr Lowe, the virus will be contained, and the Australian economy and financial markets will recover.
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