Global Recession Looms Over Coronavirus

Global Recession Looms Over Coronavirus

Stocks continue to nosedive as the world struggles to halt the spread of coronavirus. On Thursday, the U.S. markets witnessed yet another drop that took the markets’ index to a historic fall.

The Dow has been on free fall since the outbreak of COVID-19 in the United States, and took a further leap downward on Thursday as president Trump and the Federal Reserve failed to proffer a solution to the rapid dwindling of stocks as a result of the coronavirus outbreak.

The Dow Jones Industrial Average closed 2,352.60 points lower, or 9.99%, at 21,200.62. That’s the market worst fall in 34 years. The S&P 500 plunged 9.5% to 2,480.64 to join Dow in bear market. Nasdaq showed no difference, closing 9.4% lower at 7,201.80, all replicating the 1987 crash that took over 22% value off the markets.

The remarkable turns the falls are taking is pointing to a possible collapse of the markets, which will usher in a global recession. Bloomberg noted that roughly $17 trillion has been erased from the stock market in 52 days. The pace is five times faster when compared with the 2007/2008 financial crisis that took 262 days for a similar amount to be wiped off.

Asian markets were on a rough ride as the global stock markets crash took a swipe on Singapore, putting an end to the defiance that has yielded a years-long bull run. Coronavirus came with a devastating wind that practically destroyed the hiding places and left investors exposed.

Japan doesn’t have a better story; Nikkei went down as far as 10%, falling freely to its worst since the 2008 financial crisis. Across the Asian pacific, the markets yawn with despair, leaving investors to wrestle effortlessly to savage what they can.

The Dow futures went down about 3% in Asia, taking along the S&P and 500 futures.

Australia’s benchmark went down about 8%, marking its worst performance in recent times and may drift further in coming weeks. Australia has injected $5.5 billion into the financial sector.

Hong Kong’s Hang Seng index dropped 5% while China’s Shanghai composite fell 3%.

Europe took further hit after Donald announced a travel ban for European countries, crippling the already wobbling aviation sector. The UK’s main index fail by 10% on Thursday, it’s worst since 1987. Though there was insignificant positivity in some markets in the Euro-zone, the overall performance of stocks beams with disappointment and uncertain future.

In commodities, the oil market has been on the loose and has been falling freely since OPEC members disagreed on production cuts that could have helped to stabilize price. Brent went further down 50 cents or 1.5%, at $32.74 a barrel after it fell more than 7% on Thursday. The U.S. crude went down 1.6% at $30.99 per barrel on Thursday.

Gold, usually a safe harbor in times of global economic trouble failed to secure its island from the plummeting economic influence. It fell 4% to $1.563.42 an ounce in 48 hours.

The commodity downturns signify troubles for African countries. The plummeting prices are stoking inflation and increasing chances of recession in a very short time.

South Africa’s stock market witnessed a plunging shock that sent vibration through the spines of leading industries in the market. Johannesburg Stock Exchange (JSE)  fell by more than 10% for the first time in 23 years.

Telecommunication giants, MTN Group, Vodacom and Telkom took dwindling turns in the stock market.

MTN plunged 13.9% to R54.39 ($3.36) per share, Vodacom fail 5.3% to R104.14 ($6.43) while Telkom slumped 7.4% to R23.39 ($1.44).

Nigeria is finding it hard to sell its oil in the face of low cost that has gone below its budget benchmark. The Nigerian National Petroleum Corporation (NNPC) is wary of a bleak future if coronavirus is not contained soon.

“Due to the Coronavirus pandemic, Nigeria has about 50 cargoes of crude oil that have not found landing. This implies that there are no off-takers for them for now due to drop in demand. Today, I can share with you that there are over 12 stranded LNG cargoes in the market globally. It has never happened before,” Mallam Mele Kyari, NNPC GMD said.

The naira fell against the dollar to sell at N420/$1 at black market as a result of the fall in oil prices. Though it was attributed to speculation by Bureau de Change operators that the Central Bank of Nigeria is about devaluing the naira, exchange rate is still fluctuating around N375/$1 even after the intervention of the Apex bank.

The US stocks showed signs of recovery on Friday after Trump announced measures to tackle coronavirus, the markets leaped to significant gains to close the day in remarkably the best way since October 2008. But despite the gains, Wall Street ended the week with losses.

The S&P 500 went up 5.8%, while Dow was 5.7%, or 1,220 points, and the Nasdaq Composite was 5.4%. However, the stability of the growth is not guaranteed and the market will likely take another fall at any negative news about the government’s efforts to quell the outbreak.

The markets’ troubles have been attributed to panic stemming from the government’s inability to announce measures to fight the outbreak.

“Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations,” said Tai Hui, Chief Asia Market strategist, J.P. Morgan Asset Management. “We need to see the number of new infections stabilize… we also need to see fiscal and no monetary policy support implantation.”

The New York Federal Reserve pumped in $500 billion and added $1 trillion on Friday in a bid to keep borrowing costs from rising. Other countries around the world are taking financial measures to keep their economy stable, including injecting funds into sensitive sectors of the economy.

However, the measures are so far yielding little results to resuscitate the global economy, mainly because COVID-19 is still spreading and will require significant containment to get the markets back on their feet again.

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