On 11 March 2020, United States stock markets experienced their biggest crash since 1987. The stock market crash was the result of a combination of factors, including the World Health Organization’s declaration that COVID-19 is now a pandemic, as well as increased infection rates across the globe and especially in the United States.
COVID-19 is currently uncontained and its spread has led to investor uncertainty across world markets. Investors are what keep markets running at full strength, and uncertainty means fewer people are investing in stocks and currencies.
Here is how the COVID-19 coronavirus influences world markets.
Asian stock markets were the first to feel the effects of the coronavirus. The market experienced the greatest impact in Asia has been the Chinese stock market, and this is directly linked to the fact that the virus originated in China. However, Asian markets have seen an evening out in recent weeks.
As numbers of infections, deaths, and recoveries are released from all countries, investor confidence in Asian markets seems to be restored.
While China has been the epicenter, the number of people recovering from the virus far exceeds those currently infected and the death rate, meaning that markets can begin to stabilize as investors feel like the situation in Asia has reached a stabilization point.
The United States saw its first COVID-19 case at the end of January 2020. The testing process has been slow, resulting in markets being relatively unaffected for the majority of February.
However, as testing has become more common and widespread, the US stock markets have felt the impact of more confirmed cases in the country. This resulted in the market crash, as well as the weakening of the dollar against other currencies such as the Euro and the Pound.
To counteract the effects on the stock market, the Federal Reserve cut interest rates, which restored some stability while also reinstating the Dollar’s strength against most currencies.
Those, people and companies that are able to work from home are expected to be less impacted by the outbreak. Take, for example, AResearch Guide who provides scholarship essay writing services for college students currently working on essays, articles or research papers around the economic slowdown. They have expert finance and economics writers who can provide you with deeply researched and well-written work that your teachers will simply love.
Europe and surrounds
It was announced in recent days that Italy is now the epicenter of COVID-19 outside of China. Italy’s infection rates have increased rapidly, making it the country with the second-highest infection rate in the world.
This has resulted in a country-wide shutdown, during which all 60 million of Italy’s citizens are lawfully required to stay at home unless there is an emergency.
While European markets are not feeling the effects as immediately as the Asian and North American markets did, many countries made preparations after seeing what happened in other regions. While the short-term effects have been mild,
European markets fear that prolonged infection rates, such as those in Italy might have a negative impact on stocks in the future.
Despite the mostly negative outlook, economists believe there is room for recovery. Market recovery will depend on a range of things, including how long market demand is delayed, whether market shock is temporary or long term, and whether there is long-term market damage.
The recovery model could take on one of three forms: V-shaped, U-shaped, or L-shaped. V-shaped recovery is the most optimistic and relies on the current situation being short-lived. U-shaped recovery is similar to V-shaped recovery, but rather than full recovery, there may be permanent economic losses.
L-shaped recovery is the least desirable and comes as the result of something being completely destroyed in the economic model, such as a break in the labor market. While most economists agree that recovery is possible, the model of recovery will only be determined once the pandemic is under control.
Stock markets are highly sensitive to outside influences. While stock market weaknesses are usually isolated and dependent on countries’ individual actions, the COVID-19 pandemic has resulted in a worldwide crisis.
Stock markets in some regions have been more strongly affected than others, but the global market is on a clear decline despite policies aimed at slowing the negative impacts of the virus. Economists do not seem too concerned about a market slowdown as yet, and even believe total recovery is possible in the current outlook.