1. Comment
February 28, 2020

Coronavirus likely to spark next global recession

By MarketLine  

As the number of worldwide Covid-19 coronavirus cases rises to more than 83,000, stock markets in Asia, Europe and North America have begun to tumble.

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As markets prepare to open in the US, huge losses have been seen in Europe and Asia with the FTSE 100 dropping over 3% on Friday in morning trading, taking it to a 10% loss for the week. The US is expected to show more big losses when trading begins.

Whilst the coronavirus has been spreading quickly, the fatality rate is comparatively low and the US and many parts of Europe have not yet been heavily affected. But in order to stem the spread, major international restrictions are causing heavy economic damage.

Sporting events, business conferences and airline travel have all been pared back and this is causing a chain of difficult business conditions right through the supply chain. Blue chip companies have been issuing significant profit warnings, including Mastercard, Apple and United Airlines.

The most volatile stocks, such as Tesla, have seen drops in share price as high as 20% over the course of the week. Major international conferences that are relied on to generate millions in revenue, such as the Geneva motor show, have been cancelled. Coronavirus is beginning to cause the crisis in confidence that almost always precedes a significant recession event.

Further pain is highly likely, as when quarterly earnings are announced the difficulties companies have experienced in the first months of 2020 will be revealed.

Market is at all time high and recession has been likely for months

Whilst the coronavirus issue is certainly becoming the catalyst, it is not the cause of the impending economic woes. This bull market has been rampant for a record period and despite ultra-low interest rates and quantitates easing in the US and elsewhere, analysts have been uneasy about the record-high prices and meagre earnings of some stocks.

Many of the tools that governments use to combat recession have already been deployed in the process of maintaining growth and, as a result, when recession begins to hit, as historically it always has, it will likely be a severe period of economic problems.

If the coronavirus drops briefly out of the news cycle there may be some temporary relief, but ultimately the picture looks bleak for the global economy in 2020.

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Build resilience in the face of COVID-19 disruption

COVID-19 has already affected our lives forever. The way we work, shop, eat, seek medical advice, and socialize will all be different in the future. Quite how different remains to be seen, but all industries must plan for multiple eventualities. Are you interested in actionable insights on the business challenges induced by the pandemic? GlobalData's cross-sector report analyzes the significance of this major disruptive theme across industry verticals. It provides side-by-side research of alternative datasets to present you with unique quantitative analysis of the effects of COVID-19 and how these differ across sectors. Additionally, it offers qualitative analysis of each sector and analyzes COVID-19’s impact on leading companies. Whatever your company’s imminent strategic plans, the long-lasting impact of COVID-19 must not be overlooked. Find out how to futureproof your business operations – download our report today.
by GlobalData
Enter your details here to receive your free Report.