Nikolas Stylianou
03 March 2020
Tourism Sector
Coronavirus is the major factor that plays a significant role for the global markets fall the recent weeks. One of the most important impacts of the coronavirus is on the tourist sector which harmed a lot the economy in the European zone. The European tourism sector has lost “two million overnight stays” in hotels since January because of the new coronavirus epidemy, European Internal Market Commissioner Thierry Britton said today, estimating that losses to the industry were at least one billion euro per month. On January 25, China banned travel abroad in an attempt to halt the spread of the epidemy. It is the largest “producer” of tourists in the world, with approximately 150 million trips abroad in 2018. Since January, Chinese tourists are no longer coming to Europe.
Stock Markets
Coronavirus panic has triggered a new crash on the stock markets today, marking the biggest weekly loss since the global financial crisis of 2008, with stocks falling to $ 5 trillion. The price showed no signs of slowing, as major European markets dipped 2-3% after opening, and continued security search pushed US Treasury yields to new record lows. According to the bets now, the US central bank (Fed) will lower interest rates next month and that other major central banks will follow, trying to shield the economies from trouble and prevent a global recession. “Investors are trying to discount the worst-case scenario and the biggest risk is what will happen now in the US and other major countries outside of Asia,” said SEI Investments’ head of Asian equities. “This period is very uncertain, no one really knows the answer and the markets are really panicking,” he added.
Major European Asian and US indexes
Restructuring in international trade and supply chains, school closures and major event cancellations have made the prospect of a global economy already grappling with the impact of the US-China trade war bleak. The MSCI Global Stock Index, which tracks nearly 50 countries, fell 1% after opening European stock markets and nearly 10% weekly, the worst since October 2008. Wall Street shares dipped 4.4%, their biggest drop since August 2011. They are now recording a 12% loss from a record high just nine days ago, entering the so-called correction phase. The CBOE volatility index, often referred to as the “fear index”, jumped to 39.16, the highest level in nearly two years, compared to 11-20 in recent months. In Asia, the MSCI regional stock index (excluding Japanese shares) declined 2.7%. The Japanese Nikkei index dipped 4.3% amid growing fears that the July-August Olympics could be canceled because of the coronavirus. “Coronavirus now looks like a pandemic. The CSI300 index of Shanghai and Shenzhen stock markets fell 2.9%.
Bond Markets Gold & Oil
The lure of guaranteed income has pushed US bond yields to dip, with those of 10-year securities landing a record low of 1.241%. This performance is lower than the US Treasury bonds’ quarterly yield of 1,436%, boosting the so-called yield curve reversion, which is historically considered one of the most reliable precursors to a recession in the US. Expectations that the Fed will lower interest rates to deal with the blow to the American economy are rising in the money markets. Analysts say the Fed’s futures are now discounting a 75% chance of a 25-basis point drop (0.25 percentage point) at the next central bank monetary policy meeting on March 17-18. Gold investors, in an effort to cover their losses from the stock market, preferred to sell the precious metals in order to avoid the margin calls. Oil market moved dramatically to the downside to almost 13 dollars since last week as the demand commenced decreasing. People have stopped using the means of transport including trains, cars, even airplanes and this caused some billion dollars be lost. The O.P.E.C(Organization of Petroleum of Exporting Countries) made an agreement with its allies to cut oil production in order to raise prices and balance the supply and demand It’s estimated that they had agreed to cut around 500,000 barrels per day.
Global Markets Short Recover
European stocks are trading slightly higher as investors hope big central banks and governments are moving to tackle the outbreak of the epidemy. The G7’s central bankers and finance ministers will hold a teleconference to discuss measures to deal with the coronavirus epidemy, though a source close to the G7 said no details of immediate fiscal measures would be announced. Monetary policy: The pan-European STOXX 600 index rose 2, after jumping 5% for Wall Street indexes. Japan Index rose up after the central bank promised that they will provide sufficient liquidity to the market. In addition, the AUS index also recovered from its huge fall with investors being optimistic and believing that central banks will stimulate the economy.
