Threat to the global economy: how coronavirus brought down financial markets

Financial markets around the world fell for the sixth day in a row amid fears from traders and investors that the Covid-19 coronavirus outbreak will undermine the global economy. In almost 50 countries of the world, more than 80 thousand cases of the disease and more than 2800 deaths have already been recorded, the vast majority of cases and deaths are in China, writes Air force.

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At the end of trading on Thursday, February 27, the American Dow Jones index fell by 1200 points, losing a total of 4,4%. This is the sharpest point-by-point drop in history. The S&P 500 also lost 4,4% and the Nasdaq lost 4,6%. London's FTSE ended 3,5% lower, while Japan's Nikkei fell more than 2%.

Weekly market losses in the US and Europe were the worst since 2008, when the global financial crisis erupted. In total, over the past six days, stocks of companies around the world have declined in price by $ 3,6 trillion.

The situation is similar in the Russian markets: following the results of trading on Thursday, February 27, the Moscow Exchange index fell by 3,4%, the RTS - by 5,1%, the prices of most major shares on the Moscow Exchange fell by about 10%. This is attributed to a sharp drop in oil prices and general concerns about the spread of coronavirus.

The fall of the indices continues until all countries of the world introduce measures to combat the outbreak: people are advised to refuse to travel, the work of various enterprises is suspended, much fewer buyers come to stores.

What is happening in the world

Italy

Italy suffered the most from the virus among European countries - by the morning of Friday, February 28, 655 cases of the disease and 17 deaths were recorded there. Quarantine has been introduced in 11 cities in the north of the country, located in Lombardy and Venice.

Public events are being canceled throughout Italy; the famous opera house in Milan, La Scala, previously temporarily closed its operations; some shows at Milan Fashion Week were held in empty audiences; the carnival in Venice was canceled.

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As BBC correspondent Mark Lowen reports, the Italian government is trying to counteract panic. The country's Foreign Minister said that an "epidemic of incorrect information" would harm Italy "more than the virus itself." According to the minister, diseases were recorded in 0,1% of the country's cities. “It’s time to stop panicking,” Prime Minister Giuseppe Conte said.

However, according to our correspondent, much is decided by how people around the world perceive the situation. And with Donald Trump not ruling out imposing travel restrictions on Italy, Israel banning the entry of foreigners arriving from Italy, and Kuwait evacuating its citizens from Milan, the Italian government will have a very difficult time changing its perception of the situation.

Greece (3 cases of illness) decided to cancel all carnivals. IN Germany already 48 sick, during France — 38, in Spain - 15.

In one of the hotels in Tenerife, almost 600 people remain under lock and key after a tourist from Italy was diagnosed with a coronavirus, later the diagnosis was confirmed by three more Italians who were there. On Thursday, 130 guests received permission to leave the hotel.

Japan (214 cases) and Iraq (7 cases) closed all schools in the country. Similar measures have been taken throughout mainland China and Hong Kong.

Japanese schools will close their doors on Monday, March 2, and will remain closed until at least the end of spring break, which in Japan usually lasts until early April. 13 million schoolchildren will have an extended break from school. Japanese Prime Minister Shinzdo Abe said it would be "incredibly important" to stop the spread of the infection in the first weeks of March. It is reported that one of the cases in Japan, a woman from Osaka who is about 40 years old, recovered, but then tests again showed the presence of the virus in her blood.

China and South Korea

В China On Thursday, February 27, 29 people died from coronavirus and 433 new cases of the disease were discovered. The total number of people infected in this country was almost 79 thousand, and the number of deaths was 2788.

The authorities ordered everyone who arrives in Beijing from the country's provinces affected by the virus to isolate themselves from others. Almost 200 million Chinese students will not return from spring break and will study online.

In the second after China in the number of cases South Korea more than 1700 cases of infection have already been recorded. On Friday, it became known about the cancellation of a series of performances by mega-stars K-Pop BTS. The musicians were supposed to give four concerts in April at the Olympic Stadium in Seoul, which were ready to attend 200 thousand people.

More than 90% of new cases of the disease in South Korea were detected in the city of Daegu, located 300 km southeast of Seoul. Many of those who became infected with the new virus belong to the apocalyptic sect “Temple of the Tabernacle of Testimony of Shin-chonji”; now the authorities are checking all its members, which is 210 thousand people. Daegu authorities said the sect leader would be charged with violating disease control measures by failing to provide a complete list of all the group's supporters.

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Saudi Arabia, where the coronavirus was not found, stopped letting pilgrims who visit the holy cities of Mecca and Medina enter the country. It is not yet clear how the situation with coronavirus will affect Hajj, which starts this year in July.

Iran

Iran remains the center of the spread of the virus in the Middle East (245 cases of the disease and 26 deaths were recorded there).

As our health correspondent James Gallagher notes, this means that the mortality rate among those infected is very high, more than 10% (14% according to WHO estimates). In other countries, the mortality rate is about 1%. This may mean that the number of infected people in Iran is clearly underestimated, the correspondent believes.

WHO expects Iran to report a greater number of infected people, because so far, according to the organization’s specialists, only severe cases are recorded there.

No longer a temporary issue?

“When fear and uncertainty dominate, markets react very quickly. And now there’s more than enough of both,” says a leading analyst at personal finance company Bankrate.com.

As a result, investors prefer to invest in the least risky assets, such as government securities.

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At the same time, many of the world's largest corporations, including Microsoft and Rio Tinto (the world's third mining and metallurgical company), warn that they will not be able to fulfill their sales plans. On Thursday, February 27, Facebook announced that it was canceling a software developers conference in May.

Previously, many economists believed that the spread of the virus would only become a temporary problem for the global economy, but now they are much more concerned.

Former US Federal Reserve Chairman Jeannette Yelen said on Wednesday, February 26, that the coronavirus could lead to a recession in the US, and investment bank Goldman Sachs warned its clients that corporate profits are unlikely to increase this year. The bank attributed this to a decline in economic activity in China and the United States, as well as “increasing business uncertainty.”

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