Why Does Coronavirus Affect Markets?
Why Does Coronavirus Affect Markets? The new type of coronavirus, which originated in China and spread to other countries, worries not only health-related institutions and employees but also financial markets.
The fact that about six thousand people have been infected with the virus and the number of people who have lost their lives has led investors to worry about the extent of the virus’s impact on the Chinese economy.
In general, since 1970, every time an epidemic occurs, global markets are affected negatively at first.
This is due to the concern that economic growth will be curtailed by the spread of the virus.
Historically, it has been observed that markets reacted negatively within three months of the emergence of viruses, and within six months they recovered and overcame this negative weather.
Investors expect China’s first-quarter growth figures to come in lower than expected as the virus negatively affects consumer spending and New Year holiday travel in China now.
Aviation Shares Fell
Monday (January 27th) was the biggest drop in the market.
The New York Stock Exchange’s S&P 500 aviation index was down.
Crude oil prices also fell in anticipation that a drop in China’s demand for air travel would have a negative impact on oil demand.
Most stock market indices from the US to Europe were downgraded.
Markets in China and Hong Kong were not affected because they were closed for the new year.
According to the Financial Times, there is concern that economic growth will be adversely affected, especially in China’s manufacturing industry, as production will be cut.
Companies Nissan, PSA, and Renault have announced they will withdraw foreigners working at their factories in China.
Suzhou, one of the heartlands of the manufacturing industry, also extended the deadline for the return of millions of migrant workers who went home for the holidays by another week.
Most international banks that have gone to grow in China have also announced to their employees that they should not go to their offices if they have made recent trips to China. As well as airline shares, shares of several luxury brands such as Burberry, China’s biggest customer, also fell.
But on Tuesday, unlike the previous day, the markets rebounded, recovering losses.
‘Those Going To Restaurants And Bars Have Dwindled’
According to Michael Farr, head of investment management firm Farr, Miller & Washington, The Wall Street Journal, markets have not fully realized how contagious this disease work and how fast it spreads.
Speaking to the Financial Times, Lee Hardman, a currency analyst at Japanese bank MUFG, commented that the virus meant a setback for the global economy and manufacturing industry, which has begun to recover slightly in recent months.
Chinese growth is already at its lowest in the past 30 years. In 2019, the economy grew by just 6.1 percent.
Trade wars between the United States and China have negatively affected China’s exports.
Speaking to the Financial Times, Michael Pettis, a professor of finance at Peking University, said the developments would depend on how fast the virus spreads, but would negatively affect consumption in the first place, as people decried going to restaurants and bars.