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How Coronavirus may have given global markets their worst week since 2008

Hopes that the epidemic would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China

Topics
Global Markets | Coronavirus | Dow Jones Industrial Average

Kanishka Gupta  |  New Delhi 

The outbreak first erupted in China on December 8, but for the first time on February 26, more cases were being reported from outside the Chinese mainland. In fact, according to the World Health Organisation, 459 cases were reported from outside while it was 412 from Chinese mainland.

While so far the has seen repercussions of the spread of coronavirus, global investors are turning more cautious as there are real fears of it turning into a global pandemic. Global stock exchanges have been suffering this week as a result. The fall in may even make this the worst week for since the 2008 financial crisis.

The led the rout as the fell 4.42 per cent on Thursday, its largest percentage drop since August 2011. It has lost 12 per cent since hitting a record close on Feb. 19, marking its fastest correction ever in just six trading days while the fell 1,190.95 points, its biggest points drop ever.

Besides, MSCI all-country world index dropped 3.3 per cent on Thursday to bring its losses so far this week to 8.8 per cent, on course for its biggest weekly decline since a 9.8 per cent plunge in November 2008.

The gloomy mood in the imprinted domestic indices red today, opening at 1000 points lower.

Moreover, hopes that the epidemic would be over in a few months and economic activity would return to normal have been shattered, as new infections reported around the world now surpass those in China.

"The now looks like a pandemic. Markets can cope even if there is big risk as long as we can see the end of the tunnel," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But at the moment, no one can tell how long this will last and how severe it will get."

The epidemic’s spread has also caused severe pain in the finances of some of the top companies, including Microsoft, and Standard Chartered, Aston Martin, Jaguar and Land Rover, — the Mexican beer company, among others.

However, Budweiser beer owner ABInBev reported a $170m hit to profits. That apart, the sharp drop in travel demand due to the epidemic has also been one of the biggest concerns.

During the height of the SARS outbreak in April 2003, passenger demand in Asia plunged 45 per cent, according to the International Air Transport Association (IATA).

According to the consultancy Capital Economics, the outbreak turning into a full-blown international pandemic would trigger severe upheaval for world trade, markets and currencies on a par with the financial crisis, when global GDP fell by 0.5 per cent.

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First Published: Fri, February 28 2020. 12:53 IST
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