Wednesday 01 April 2020
Equity markets around the world have suffered historic losses in the first three months of this year, amid intense selling linked to the spread of the new Corona virus.
The Dow Jones industrial average and the FTSE in London experienced the biggest quarterly declines since 1987, dropping by 23 percent and 25 percent, respectively.
The Standard & Poor’s 500 Index lost 20 percent in the first quarter, its worst since 2008.
The declines came at a time when the authorities ordered the suspension of most economic activities in an attempt to slow the spread of the epidemic.
Economists have warned that the blow to the global economy is likely to be worse than the global financial crisis. For example, IHS Market’s experts expected growth to contract by 2.8 percent this year, compared to a decrease of 1.7 percent in 2009.
The current crisis affected all countries of the world. IHS Market expects growth in China to drop to 2 percent, while Britain may see a 4.5 percent drop in growth. The outlook is worse for countries like Italy and other countries with less developed economies.
“We are still very concerned about the negative outlook for global growth in 2020, especially about the pressure that the economic downturn will leave on emerging markets and low-income countries,” said the International Monetary Fund head, Kristina Georgieva, on Tuesday.
In the United States, one of the central bank’s analyzes indicated that the unemployment rate could rise to more than 32 percent over the next three months, with more than 47 million people losing their jobs.
Globally, many stock indices are still more than 20 percent down compared to the beginning of the year. The sharp decline in oil prices, due to lower demand and a price war between producers, exacerbated problems in the financial markets.
Governments have pledged massive financial bailouts, which has helped drive up stock prices in the past few days.
The FTSE rose nearly 2 percent on Tuesday, while the German DAX and French CAC 40 gained modest gains.
But major US indices faltered, with the Dow falling 1.8 percent, the S&P 500 falling 1.6 percent, and the Nasdaq nearly 1 percent.
Energy companies and financial institutions were among the worst performing sectors in the first quarter of the year. And retailers, who were affected by the evaporation of sales with the closure of stores, suffered some of the biggest losses on Tuesday, with the American “Macy’s” stores retreating by almost 9 percent, a day after announcing that it would give the majority of its employees to unpaid leave.
“Despite the monetary and fiscal stimulus, we expect share volatility to remain high as long as the duration and impact of the Covid-19 virus remains unknown, as well as oil prices remain low, and profits are seen hazy,” wrote analysts at the U.S. Bank’s Wealth Management Department.