Fears Over the COVID-19 Continue to Roil Global Stocks. Major Indices Tumble. Image source: luchschen © 123RF.com
European stocks tumbled by more than 10 per cent since the beginning of the week on rising investors’ fears that the spread of the coronavirus outside of China is going to turn into a major pandemic.
European stocks continue to take a beating as new cases are confirmed daily. Just in Italy, the number of confirmed cases exceeds 400, with at least twelve casualties.
The Nasdaq and the S&P 500 fell as well, albeit less than their European counterpart – the Euronext 100, on the expressed concerns that the outbreak is eventually going to reach the states as well.
The losses were momentarily halted yesterday on the news that Gilead Sciences’ Remdesivir drug, which was originally developed for the treatment of Ebola and other coronaviruses, could be repurposed for the treatment of COVID-19 cases.
Optimism was sparked when it was announced that the Chinese government is going to release the results of the first clinical trials, that were conducted on several hundred patients in the Hubei province.
The enthusiasm, however, promptly subsided as it was revealed that a patient in the US contracted the virus without an apparent connection to another known carrier.
This could mean that it is even easier for the virus to get transmitted without detection, which makes the goal of containing it a more dubious task.
Now the threat of a global pandemic looms larger, even though the World Health Organization continues to refrain from upgrading the COVID-19’s categorization to a global health crisis.
The escalation of the situation in Italy, Iran, Afghanistan in addition to the first reported cases in Brazil, Greece, Norway and elsewhere, has underpinned the fragility of the global supply network.
Aggregate production remains subdued globally while many goods are held at various international ports, as the shipping industry falters from the experienced logistical problems in China and elsewhere.
All of these factors have contributed to the marked depreciation of global stocks. Some market experts have begun to speculate that the roiled selloff that is prompted by the virus scare served as a catalyst for a long-anticipated market contraction.
The markets had been quite responsive to external pressures prior to the outbreak of the novel coronavirus in China, which is what bolstered the 10 per cent contraction in global stocks.
Nevertheless, it is too soon to be talking of a definite new recession because the global outbreak could move past its peak in a relatively short period of time, which would reinvigorate investors’ confidence.
SPX vs N100 vs NDQ. Image source: Trendsharks ©, created with TradingView.com
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