The Novel Coronavirus (Covid-19) outbreak has done a lot of damage, not only in terms of life but to the global economy as well. While a large number of people have lost their lives till now, a comparatively bigger number are still reeling under the impact of the outbreak. This pandemic is not looking to be contained any time soon as medical professionals and healthcare institutions have still not been able to come up with a sure to treat this virus spread completely.
Till the early hours on 4th March 2020, reportedly around 3,200 people have lost their lives while over 93,000 cases of Covid-19 have been confirmed across 80 countries. China, which has been identified as the origin of this epidemic, has so far seen approximately 80,270 cases because of the virus. A large number of cases have also been reported from South Korea, Italy and Iran, as well as from the Diamond Princess Cruise Ship, from where approximately 706 cases were reported. Fifty-one cases have been reported from the UK, mostly from the tourists and people coming in from other countries.
The increase in these numbers in the month of February had created panic all across the globe, as the World Health Organisation (WHO) had declared this a global pandemic, which could further develop and spread to every part of the world. Though, the recent numbers have displayed a slowdown in the number of daily cases, primarily because of China’s aggressive measures in quarantining the affected patients as well as trying to keep all the people in the affected regions indoors. In this current scenario, world leaders have already started coming together to fight this outbreak, both in terms of medical exigencies, as well as the economic damage it might cause.
Economic Implications of the Coronavirus
In the month of February 2020, when the outbreak was reportedly at its peak, and the number of cases was continuously rising, the global stock markets dropped steeply, as investors lost billions of dollars of their capital. The FTSE 100 Index of the London Stock exchange market had reportedly lost around 11.63 per cent in the month of February reaching its 52-week low value, while the US benchmark index, Dow Jones Composite slumped by 10.32 per cent, its largest loss since the 2008 Mortgage and Financial Crisis. Also, the US based tech-heavy Nasdaq 100, fell by 7.20 per cent during the month. During the same time duration of February, the benchmark index of the China, which emerged as the origin of the pandemic, the Shanghai Composite Index dropped considerably, with a sharp fall on the last day of February of 3.7 per cent, which brought the collective fall for the month of February to about 10.6 per cent.
The economic impact has not just been limited to the stock markets, but the sports side has also been impacted majorly, especially in Europe. In Italy, which has seen the greatest number of cases in the European Union, many towns, which were suspected of having maximum people with infection, were put on lockdown. These aggressive measures were followed by cancelling out sports events, especially from one of the biggest football leagues in the world, Serie A. This resulted into the football association of Italy losing out huge revenues that were expected from TV rights and the ticket sales for the game.
Apart from this, the manufacturing output, especially in countries like China and South Korea, which are major manufacturing hubs for some of the biggest technology companies, has suffered significantly. The exact data though, is still being evaluated, but as per initial estimation, there could be a case of a recession in the Chinese economy for at least two more quarters. The reduced output from the nation is already causing trouble for other countries like the United States of America because China is one of the biggest trade partners for a lot of countries, especially for the tech companies based out in the USA.
The situation has also deeply impacted the travel and tourism sector because a huge number of Chinese travellers and migrants that travel to all parts of the world has suddenly stopped. Analysts have estimated that over a period of the next few years, the decline in demand for the US Travel and Tourism space would have a hit of around US $10 billion. As per various industry experts and analysts, Chinese visitors to the United States of America had spent around US $34 billion on travelling and availing transportation services during the last year.
Some tourism companies based out of the United Kingdom have been reeling to the vagaries of the Covid-19, as their stocks which are trading as a part of the London Stock Exchange market have seen high volatility, especially in the middle and the latter part of February.
The Collaborative Effort to fight Coronavirus
The repeatedly deteriorating situations due to the spread and the economic implications of the Covid-19 have led to some of the biggest institutions from the world to come together and to take collective preventive action to fight the situation. The US Federal Reserve has announced an interest rate cut, in an extremely aggressive stance, to protect the economy of the country from all kinds of negative impacts that could come due to the epidemic. This was followed by a marginal rise in the number of cases in the United States in the first 3 days of March. This is reportedly the first such emergency interest rate cut since the 2008 Financial Crisis. The new benchmark interest rate is said to be in a range of 1 per cent and 1.25 per cent, as per the announcement of the Fed Chairman Jerome Powell.
It’s not only the US Fed which has raised its concern and acted accordingly but various high street UK banks such as Royal Bank of Scotland, Santander UK and Barclays have also announced that they would be rolling out emergency loans to help the businesses that have been experiencing financial strain due to the economic implications caused by this pandemic. This has been primarily done due to the manufacturing and factory activities completely getting at a halt in China, which caused the logistics functions and supply chains of the UK based companies to be at significant financial risk. These banks are reaching out to all of their small and large customers to understand any impact that the Coronavirus might have caused to their businesses and to help these businesses accordingly with commercial loans at a relatively lower rate of interest.
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