Effects of the emerging corona virus on global financial markets
After recent statistics, and with the escalation of new infections with the Corona virus in the world, and the number exceeding three million infected people, the global economy is under tremendous pressure, which resulted in the loss of jobs, which prompted governments to work to provide economic packages to help business owners, and many experts have dealt with the economic repercussions of the virus, especially In the absence of news about the creation of a medical drug to treat it, as some others shed light on conspiracy theories and rumors that are reflected in the economies of countries, they are promoting the theory that Corona is nothing but a biological weapon of intimidation, fear of disease and not the disease itself, i.e. the reason has great economic repercussions!
The virus has spread in approximately 183 countries, and scientists have identified no less than eight strains of the emerging corona virus that is spreading around the world, and the size of the economic damage has been proven, as it is negative and dangerous and promises huge losses estimated at trillions of dollars, and no one can count the numbers, as they are in Permanent escapism, all of which are numerical speculations, whether it was from the Chinese government, which was the beginning of the crisis. Or the European Union, which became the sequel to America, the last station for the virus and the main index for stocks, as it is in a deplorable state coinciding with a hysterical drop in stocks, and the Dow Jones index had a role as it fell from the level of 30,000 points to 18,000 to return and stabilize through the movement Corrective towards the 24,000 level, and the SP500 index, which in turn fell like a thunderbolt from 29.00 to touch 22.00 during the month of March, then heads upwards and is currently trading at 28.30.
The beginning of this year 2020 also witnessed a very fragile situation, whether local or global, for Corona to come and claim thousands of lives and increase the impact on the global economy through stumbling in trade exchange, fluctuations in prices and the petrodollar war between Saudi Arabia and Russia.
The United States, which made headlines after China's retreat, is facing an economic storm and is in a state of recession, as daily reports show that the health and economic risks will be much worse. Precautionary measures such as suspending lessons, social distancing and losses incurred by stocks, as well as the significant drop in oil prices that harms shale oil production, all of this will severely affect productive industries and waste money amounting to $2 trillion.
In light of this upward recession, spending on debt and the budget deficit can rise to unsustainable levels. We recall here that when Obama took office, the debt amounted to ten trillion dollars, and it reached twenty when Trump assumed the presidency. At the present time, the proportion of public debt is about 23 trillion dollars, thus constituting 107% in relation to the gross domestic product.
The demands of the unemployed also increased, and the number reached 6 million and 600 thousand job applications last March, and 700,000 people lost jobs considered sovereign.
The truth is that Corona is an economic crisis as well as a health one. Europe, which does the impossible to avoid aggressive trade policies, is about to indirectly announce the dissolution of the European Union, which has shown its weakness in the face of this serious (humanitarian and economic) crisis. % of companies, and the cost of loss during this crisis until March was about $ 120 billion.
As for the euro, it seemed to collapse rapidly, as it is weak like the old continent. Everything that happens indicates that the European bloc will soon lose its justification for its existence, as the currency has become at the level of 1.0700 and is heading slowly towards 1.0000, which means one euro is equal to one dollar, or the so-called PAR. It is likely that it will return to its previous official value, i.e. 0.9400, to fade after a while and end, and the European union will end with it. In addition to the sharp drop in oil prices As it reached the level of $12 per barrel as a result of the decrease in demand for crude as a result of Corona and the random increase in production by Russia and Saudi Arabia, the crude oil markets witnessed a weak price correction attempt to reach $27, to return and bend quickly due to the complete absence of demand.
And Goldman Sachs had warned in early March of the epidemic and that it would spread rapidly and reach its peak in April and lead, as a first stage, to a decline of 3% in annual growth, and a sharp decline in the stock market in the United States, and this is what actually happened. As for China, which managed to get out of this pandemic, even partially, it believes that weakening the relationship with the American economy will represent a salvation from trade wars. And the report continues that we will witness a sharp decline in commercial activities and stock exchanges in Beijing, then a rapid recovery and containing the impact of the decline on the global economy as a whole, as the likely scenario we will see a V-shaped change in the charts.
As for Bloomberg Agency, experts expect that the current year will be the worst since the economic recession of 2009, and that global output will lose about $ 3 trillion at the end of the year, and growth in the United States will drop to less than 2%, China 3% and Asia 2%, so the sharp declines in Domestic demand, tourism, trade and production links, as well as supply disruptions, the results of which are very large, shrouded in high uncertainty.
According to the latest study by UNCTAD (United Nations Conference on Trade and Development), the slowdown of the global economy to less than 2% could cost about $2 trillion (as we mentioned earlier), and this figure the US administration has begun to print in the Federal Bank, which will be a burden and debt on the American people. Thus, the United States entered into a spiral that leads to widespread bankruptcy and may cause a "Minsky moment" which is a sudden collapse of asset values (according to the UNCTAD report).
This is actually indicated by the collapse of the shares of all industrial, commercial, technological, energy and airlines companies, which recorded losses of $ 180 billion and the loss of 25 million jobs worldwide. All these backgrounds caused by Corona constitute a contributing factor to the feeling of discomfort, as these crazy fluctuations indicate a world of great concern, and it is difficult to predict the movement of its markets and even the possibility of determining its bottom line.
It is expected, in terms of the Corona virus, that we notice a decline in its health impact in early summer, hoping that it will not return at the gates of autumn, as it is said. As for the rebalancing of power between East and West represented by a clear economic conflict, there are those who say that great powers are emerging economically, militarily. Commercially, these powers want to reshape global markets with a new structure to serve their interests.
In conclusion, and despite the health and financial damage caused by the Corona virus, we must mention the famous saying, “May the harmful harm be beneficial.” This pandemic has left many benefits, as the streets became quiet, crowds disappeared, pollution decreased by 50%, and perfect family togetherness. A dose of hope was sufficient for the inevitability of steadfastness and the commitment of homes in Eastern and Western societies to overcome the Corona pandemic.