Coronavirus Impact on Global Stock Markets and Reasons for Havoc
Dr. Narsaiah Neralla
Department of Accounting
Cihan University-Erbil
The stringent Coronavirus pandemic overwhelmed every day thousands of lives and this epidemic caused a global health crisis that major amount alive today, this phenomenon haven’t seen earlier. Coronavirus steep geographical extension with very high contamination rate and also known as COVID-19.The outbreak of coronavirus has basis a pandemic of respiratory disease (COVID-19) for which vaccines and embattled therapeutics for cure is unavailable. The outbreak has caused major worry about public health around the world. At the same time, there is rising anxiety about the economic consequences as families are required to stay home to slow the spread of the virus.Besides, Coronavirus wreaked disaster in the global economic market, including Middle East countries. Most of us witnessed the Global Financial crisis of 2008, which has strange and turbulent situation in the capital markets. The economic hazard of coronavirus, integrated with the oil price combat triggered by the Saudis, lead the global market into state of disorganisation.
Global stocks index reported decline trend in stocks and investors stock investments value has been decline due to pandemic impact on investor’s investment into equities fearing recession. The entire world stock markets has influenced to the COVID-19 pandemic with upsetting volatility because traders have panic sold out of fear. However, China, the country in which first case of coronavirus was detected has emerged almost unscathed amid a global market rout. In just couple of months, the coronavirus pandemic has ruined almost 70 % of the global market investment. The spread of the virus has stimulated panic across the world and stunned the confidence of investors.
Moreover, ongoing epidemic created worse circumstances because crude oil war amongst Saudi Arabia and Russia, which has brought volatility into other commodity market. During the inception of epidemic only the equity and debenture market were impacted by COVID-19. Presently, panic about the other assets as commodities and currency markets are in havoc caused by the crude oil war. After a collapse of this magnitude, generally market confidences regain is very difficult within short period of time. Therefore, it is healthier to wait for quiet before going to take large amount of funds investments decisions.
Entire world economy drastically downturn since coronavirus identified in China Wuhan city meanwhile some of well established stock exchange markets reported downturn percentage during the past three months observe the graphical figure below.
Potential investors have been naturally observing the market trend and stock markets across the world suffered trillions of US dollars losses arose since the epidemic identified. This is the worst market situation than the global financial crisis of 2008. Moreover, fears of the coronavirus impact on the global economy have stunned stock markets worldwide and reduced stock prices and bond returns. Here are overviews the reasons to downturn of global stock markets.
Reasons to downturn of Global Stock Markets
Lets us observe the various reasons to drive sharply downfall of global stock markets in combination with COVID-19.
1. Crude Oil War effect
In addition to COVID-19 crude oil war is one more reason to global economic uncertainty. Governing body of crude oil through Organization of Petroleum Exporting Countries (OPEC) has taken decision to restricted to production of crude oil from April 2020 but this decision was denied by Russia, result to increased the production in the open market at the same time there was very less demand for crude oil because of outbreak COVID -19.
2. Financial and Commodity markets effect
Due to COVID-19 all other commodity market has been reported downturn but, gold price in the market has increased because of the gold commodity is safety investment. Moreover, global central bankers like US Federal Bank cuts bank interest rates by 50 basis points therefore, investors turn to invest their money into gold. Consequently, gold exposure brings down portfolio volatility.
3. Global Economic Growth slowdown
The organization for Economic Co-operation and Development (OECD) downgraded its 2020 real GDP growth rate for almost all countries in the world. Chinas gross domestic product growth identified the largest downgrade in terms magnitude. The Asian economic largest is expected to grow by 4.9% this year, which is very slower than earlier forecast of 5.7%. Meanwhile, the global economy is expected to grow by 2.4% in 2020 it is down from the 2.9% forecast earlier.
4. Slowdown in manufacturing sector
The manufacturing sectors of all the countries have been strike hard by the coronavirus outbreak. The Caixin/Markit Manufacturing Purchasing Managers’ Index reported a survey of private companies showed slower china’s manufacturing activity and report indicated in at a record-low reading of 40.3. A reading below 50 indicates contraction.
5. Slowdown in Service sector
The Coronavirus outbreak have also strike hard the service sectors industry for all the counties. As declined consumer consumption hurt of retail stores, restaurants, tourism, public and private transport and aviation industry among others.