The spread of coronavirus has had a significant economic impact with major losses being sustained by markets around the world as the virus has spread and confirmed cases have increased.
The 24-25 of February saw the biggest one day market loss in four years in the UK, with a £100 billion stock market loss in just 48 hours of trading. A 3.5% drop on Wall Street and 100 points loss on the Dow Jones Index at the same time in the US further underlined the serious economic consequences of the virus spread. Big name firms also felt the pressure and warned of tumbling profits – as we reported, in that same 48 hour period, the cruise company Carnival suffered a 6% loss and tour operator Tui a 5% loss while the European airline easyJet plummeted 20%.
Disney, Apple, Starbucks, McDonalds and a host of other major brands have also warned that they have been affected with store closures, production delays, manufacturing issues and a fall in demand as people travel less, eat out less and some cities face being quarantined.
To this backdrop, investor risk appetite is very low with no-one knowing when the end may be in site – so far, the virus has sent markets on a roller coaster ride.
Yesterday (Thursday 05 march) markets plunged again, with the Dow Jones Industrial Average losing 3.5% of its value and the Nasdaq Composite down 3.1%. The US 10-year Treasury Yield also fell to 0.9% – an all time low. CNBC reports that also yesterday, “[the] Dow Jones Transportation Average… dipped into bear market territory Thursday. United Airlines cratered 13.4%, while American Airlines tanked 13.2%, suffering its worst day since 2016.”
The roller coaster decline in markets prompted by coronavirus means that investor demand for safe haven assets is thriving – and that puts gold firmly in the driving seat with no end in sight for the virus, as scientists struggle to develop a vaccine and determine how transmission works.