The world is currently witnessing one of the toughest times for striking a balance on the economic as well as social front. The contagion effect of the novel coronavirus has taken a toll over human life, as well as the economic performance of the individual countries and aggregate global economic growth.
The widespread effects of the virus have compelled the people to stay locked indoors for several days in China. Now that the virus makes its way to several other countries, domestic administrations have also cancelled visits to and from foreign land.
The rising number of cases and deaths across the globe have had a sharp and adverse effect on the sentiments of the people. Investor actions validate the shaken confidence amidst mounting worries. In the past days, markets across the globe witnessed a huge shock and tumbled to record lows.
Investors with low confidence resorted to engaged in what was seen as the historical sell-off across the globe. Stocks were reduced to their fresh lows, and commodity prices plunged too. Back to Back series of events happening due to the corona contagion spread have led to reduced investor confidence and intention to shelter their investments in a safer investment channel like gold.
The past 20 days have been a nightmare for global investors with trillions of dollars been wiped off from the market. There is a continuous and significant dive in the markets, and they are struggling to gain upside momentum.
Huge Losses Across Markets and Industries
The losses that the international stock markets have incurred during these times are valued worth trillions. Investors are in a split as the bearish market only intensifies. According to Reuters, the markets across the globe have witnessed a wipe-out of $6 trillion of global equities in what is considered as the biggest weekly stock market rout since the 2008 financial crisis.
Due to the travel bans and grounded airlines, disturbed supply chains and uncertainties surrounding the return of the people at work, the impact of coronavirus is expected to weigh heavily on the global economy.
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Companies are rolling back their earnings guidance and expecting slower growth in the quarter from January 2020 to March 2020, and the effect can be seen on the reduced stock prices.
On 12 March 2020, Washington H. Soul Pattinson & Company Limited (ASX:SOL) downgraded its half-year profit estimate due to the novel coronavirus outbreak and the stock plunged by 4.473% intraday and inched closer to its 52-weeks low price. Also, on 13 March 2020, SOL was trading at $17.070, down by 4.849% (at AEDT 1:35 PM).
The travel industry across the globe has taken a serious hit and retailers are relying more on the online sales platforms to increase their reach to a greater number of customers. As the numbers are still awaited, it is not suitable to speculate the extent of losses that the outbreak of coronavirus could possibly have over the business globally.
Governments, administrations and authorities are taking early measures like banning travels and visas, reducing interest rates and managing health facilities to avoid the severity of the corona-contagion spread.
ASX Defies Morrison Government’s Stimulus Package
In times, when the challenges are sprouting due to the spread of the coronavirus, the Prime Minister of Australia, Scott Morrison declared a $17.6 billion economic plan to keep Australians in jobs, keep businesses running and helping households as well as the Australian economy.
The market plunged significantly during the day, defying the declaration of support from the Morrison Government that is intended to directly support up to 6.5 million individuals and 3.5 million businesses.
In a similar fashion of announcing a stimulus package, the UK government announced a £30 billion stimulus package, which is said to the most far-reaching anti-coronavirus package globally.
The current crisis is so severe that the benchmark index S&P/ASX 200 had reached a level where it was during January 2019 on 11 March 2020 dipping by 3.73% and settled at 5,725.9 with the worst performance from the banking sector that dropped by highest 6.41%.
Following the similar trends on 12 March 2020 as well, the S&P/ASX 200 took a sharp dip of 7.94% and settled at 5,304.6, while most of the sectors also witnessed a sharp downturn of more than 5%. On 13 March 2020, the same index was trading at 4955.8 points, dipping by 6.58% (at AEDT 1:42 PM).
The S&P/ASX Emerging Companies Index and S&P/ASX 200 Energy (Sector) dropped by approximately 9% during the day’s trade on 12 March 2020, while on 13 March 2020, the index was trading at 6,122.2 points, slipping by 8.07% (at AEDT 1:45 PM).
As Australia remains prone to the global coronavirus challenge, the Morrison Government believes that it has balanced the budget and managed its economy to avoid harms to the health, well-being and livelihoods of Australians.
Precautionary Measures in place Globally
As the number of confirmed cases for coronavirus in India reaches above 60, the country has placed a ban on allowing visas till 15 April, with a few exceptions.
In its latest move to combat the coronavirus spread, the US President, Donald Trump announced a ban on European travel into the US.
Notwithstanding any measures to secure the domestic economy and social well-being, the markets only tumbled further. The sharp fall on the ASX came after the declaration from the US President.
Not only are the travel bans in place, but the Governments are acting to secure the economy as well as boost financial stability.
The major decreases in the interest rates in the US, the UK, Canada, Australia etc. brought to the table seem to be less drooling for the investors, as they are shying away from responding to these stimuli and sell-off remains in place.
The announcement of the stimuli packages in the wake of time are likely to support the economic growth in the near term and also minimise the uncertainties in the environment. The only winners that emerged in the current scenario of sell-off and rate cuts were the high-grade government bonds and safe havens like gold.
As the coronavirus is impacting the lives in other countries and stimuli packages along with reduced interest rates become effective, the investors stand with mixed feelings. Investors might not take much time to gain confidence in the market as well as support a market rebound with strengthened sentiments.