The effect of coronavirus on stock markets, S&P 500 index
The spread of the coronavirus epidemic continues to put pressure on global stock markets and other risky assets, despite the monetary stimulus measures taken by the central banks. Last week, the World Health Organization recognized the coronavirus as a pandemic. The number of confirmed cases of coronavirus exceeded 169 thousand, and the number of deaths reached 6513.
Governments in countries affected by the epidemic are taking restrictive measures to curb the spread of coronavirus. The United States imposed a ban on entry from Europe, which led to the collapse of global stock markets. US stock market indices plunged in their worst day since the 1987 crash.
On Thursday, the S&P 500 fell more than 9%, while the Dow Jones fell 10%. On Friday, indices regained some of their lost ground amid expectations that the US Congress will adopt a law on economic measures to deal with the consequences of the epidemic.
At an emergency meeting on Wednesday, the Bank of England decided to cut the interest rate from 0.75% to 0.25%. Consequently, the pound fell to a 5-month low.
On Thursday, the ECB held a meeting at which the regulator announced the expansion of the quantitative easing program by 120 billion euros, as well as the launch of a program to provide cheap loans to banks. This decision weakened the single currency.
An emergency meeting of the Fed was held on Sunday, at which the central bank decided to cut the interest rate from 1.25% to 0.25% and increase the amount of asset purchases by $700 billion. This decision put downward pressure on the dollar, but could not provide support to the stock market, as investors’ concerns rose amid the regulator’s emergency measures.
Main events of the current week
- On Tuesday, data on US retail sales and the UK unemployment rate will be presented. Volkswagen will present an annual report.
- On Wednesday, data on the consumer price index in the eurozone and Canada, GDP of New Zealand and crude oil inventories will be released. BMW will publish an annual report. Fed will hold a monetary policy meeting.
- On Thursday, a meeting of the National Bank of Switzerland will be held. Data on employment in Australia will also be presented.
- Retail sales in Canada will be released on Friday.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.