Global markets hit by coronavirus concern

Financial markets around the world made the headlines last week for all the wrong reasons as many records were broken: the US markets suffered their worst week since the 2008 global financial crisis as three main indices ended the week down more than 10% (with the S&P 500 plunged from an all-time closing high into correction at a record rate). It was a similar story across the pond with major European markets falling steeply and London's FTSE 100 down 3.2%. Why has this happened? Coronavirus.

Coronavirus - what is that?

Unless you’ve been living under a rock for the past three months, you would have heard of ‘coronavirus’ - which  has been officially and creatively named COVID-19 (short for coronavirus disease 2019) by the World Health Organisation. Essentially, and as with other coronaviruses, COVID-19 attacks the respiratory and immune system. For the purposes of this brief article, the disease emerged late last year in Wuhan, China and has since spread to over 55 countries and infecting over 80,000 people around the world.

How have governments responded?

Countries have responded to the growing concerns of coronavirus in many ways. For instance, China has cut interest rates to inject liquidity into its economy to help its temporarily shrunken workforce. Other countries like Italy and Malaysia introduced stimulus packages totalling billions of pounds to alleviate economic repercussions. Elsewhere, Hong Kong have announced plans inter alia to payout the equivalent of £1000 to residents over the age of 18. 

What is going to happen?

The recent spread of more coronavirus cases outside China, particularly in Italy, has undoubtedly raised concerns that economic activity will be affected on a much wider and longer lasting scale. Commentators like Scott Minerd (chief investment officer of Guggenheim Investments) suggest that the US economy is likely to fall into a recession if the outbreak continues and becomes a pandemic. This comes at a time where many countries and economists have slashed their growth forecasts. But the Federal Reserve have asserted with a brazen assuredness that the “fundamentals of the US economy remain strong”.  

Ultimately, the extent of the damage to be caused by coronavirus it is still unknown, but what is clear is that governments, investors and businesses face more anxiety ahead.