Coronavirus and stock indices in the week from 26/3 to 1/4/2020
Stock indices passed the first quarter of 2020, which is one of the worst in history. The Dow Index has fallen by 23.2% which is the worst decline since 1987. The SP 500 recorded a decline of 20%, the worst drop since 2008. Although the indices ended last week with a sharp rise supported by the approval of gigantic support in the US economy amounting to 2.2 trillion USD, the week as of March 30 began with a decline again under the influence of reports of exponential growth of pandemic around the world.
The sectors that are currently suffering the most are tourism, aviation, logistics, transport, hotels, restaurants, etc. However, other sectors, where the deeper impact of the crisis is beginning to show itself, are also emerging. One of them is the steel industry.
In the USA, for example, car sales are expected to fall by 80% this year. Car makers have discontinued production and this poses a major problem for European steel producers, that are strongly linked to the automotive industry. The difference with the 2009 crisis is now that the previous crisis was preceded by strong years so steelmakers entered a crisis with financial reserves. Now, however, even 2019 was not good for the steel industry so many companies had to use their financial reserves in the last 6 months. Companies with high leverage will therefore have significant problems.
In this context, it is worth mentioning that the global debt amounted to a record $ 253 trillion by the end of 2019, of which $ 19 trillion is due in 2020. It is already likely that this amount will not be paid this year
. Not only indebted companies but also countries can bankrupt. These concerns arise especially in countries such as Turkey and South Africa, where a large part of GDP comes from tourism. Therefore the ongoing crisis may surprise with completely unsuspected dimensions.
- Worldwide coronavirus infections exceeded 950,000 cases detected. There are more than 215,000 in the US, 110,000 in Italy and 110,000 in Spain. To date, 3,600 people are infected in the Czech Republic.
- In Germany, they are considering immunity certificates. Who will be identified by testing to have coronavirus antibodies will have this confirmed in the certificate and will not be subject to any restriction measures. This approach could reduce the economic impact of the current crisis. The United Kingdom also ordered 2 million antibody tests from China.
- Economic data point to deepening economic problems. Last week, the number of insurance claims in an unemployment in the US reached a record number (3.3 million applications). Similar numbers can be expected this week.
- PMIs on manufacturing purchasing managers activity reported this week show strong attenuation in Japan (PMI 44.8), South Korea (PMI 44.2), Italy (PMI 40.3), Germany (PMI 45.4). China's PMI, by contrast, surprised with the positive value of 50.1, which shows that the economy is starting again in this country.