Global stocks may record record weekly decline since 2008 due to pandemic fears

UNITED STATES (OBSERVATORY NEWS) — Global stock markets may record a maximum weekly decline since the height of the financial crisis in 2008, as investors sell off risky assets amid fears that a coronavirus outbreak will turn into a pandemic and trigger a global recession.

Countries on three continents reported the first cases of coronavirus infection on Friday, while the world was preparing for a possible pandemic.

Director General of the World Health Organization Tedros Adhan Ghebreyesus warned that all countries should prepare, because the outbreak has the potential to spill over into a pandemic.

European stocks fell 3% on Friday, dropping after Asian stocks and Wall Street mass sales.

“We don’t even have to wait for economic data to see how badly the economy is suffering. We see that airline and hotel sales are already dropping by half or so, ”said Tomoaki Sisido, senior economist at Nomura Securities.

In addition to disruptions in international transport and supply chains, economic damage also seems inevitable, while several governments are closing schools and canceling major events to stop the spread of the pathogen.

“We can say that the influence of the coronavirus will be clearly much stronger than from the trade war between the US and China. So the Fed has no reason to take a wait and see attitude next month, ”said Sisido.

The MSCI global stock index slipped 0.6% after falling 3.3% on Thursday. This week, the index lost 9.4% and may show the strongest weekly decline since the decline of 9.8% in November 2008.

The main Wall Street indices fell for the sixth consecutive session on Thursday, with the S&P 500 falling 4.42% and confirming the fastest correction in history. The S&P 500 ended the session 12% below its record closing peak on February 19th.

The CBOE volatility index jumped to 39.16, the highest level in about two years. The index tracks the expected fluctuations in US stocks over the next 30 days.

Japanese Nikkei lost 3.7%, while the Chinese blue chip index CSI300 slid 3.6%.

Oil prices fell to a minimum of more than a year on Friday and could record a maximum weekly decline of more than four years, as the rapid spread of coronavirus raised concerns about a slowdown in global demand.

The Japanese yen rose Friday to a one-month high against the dollar as investors turned to safe assets amid growing fears about the spread of the virus.

Money markets are now almost 100% sure that the US Federal Reserve will lower its key rate next month.

On Thursday, the Fed rate futures indicated an approximately 76 percent chance of lower borrowing costs in March and a three-quarter percentage point reduction by September, according to CME Group FedWatch.


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