The market is currently underpinned by coronavirus, it is not known how the virus could impact the global economy since no kind of treatment has been established. The U.S-China trade war has surely had a significant impact to the down turn in positive (bull) markets. A global recession could be eminent, the U.S stock market and bond yields have retreated from their all-time highs as there seems to be an economic cycle brewing. Global interest rate yields and equity earnings could drop to the lowest level since the 2008 financial crisis and global central banks could be forced to lower interest rates to help stimulate the economy. Oil and energy prices remain under pressure as global growth and demand slow down. As Sarkar said(a Thompson Reuters’ reporter), the outbreak has also significantly increased the chance Beijing doesn’t comply with all terms of a Jan 15 initial trade agreement signed with Washington, potentially reigniting a damaging trade war between the world’s two largest economies.
(Jiang and Goh, 2020) Doctors in Shanghai are using infusions of blood plasma from people who have recovered from the coronavirus to treat those battling the infection, reporting some encouraging preliminary results, a Chinese professor said on Monday. (Jiang and Goh, 2020) The coronavirus epidemic is believed to have originated in a seafood market in the central city of Wuhan, capital of Hebei province, and has so far killed 1770 people and infected more than 70 000 in mainland China. According to Jiang and Goh, Chinese scientists are testing two antiviral drugs and preliminary results are due in weeks.
(Koranyi, 2020) German economic growth will remain weak in the first quarter of 2020, weighed down by weak exports and coronavirus outbreak in China, the Bundesbank said in a regular economic report on Monday. It added the virus could disrupt global value chains and could lead to delivery bottlenecks for German companies. (Kihara and Leussink, 2020) Japan’s economy shrank at the fastest pace in almost six years in December quarter as a sales tax hit consumers and business spending, raising the risk of a recession as China’s coronavirus outbreak chills global activity. According to Kihara and Leussink BOJ Governor Haruhiko Kuroda said the central Bank would consider additional easing if the coronavirus outbreak significantly threatened Japan’s economy and price trends, the Sankei newspaper reported on Monday. Kuroda told the Daily the outbreak was the ‘’biggest uncertainty for the economy.
The coronavirus epidemic seems to be under control for now although its spread cannot be underestimated. Blood plasma infusion and the antiviral drugs currently under testing are the best hopes to contain the virus. None the less there is hope that the outbreak could find a way of treatment in the very near future so that a global financial crisis, unemployment and deflation do not take a toll on the economy. (Sarkar, 2020) It is impossible to forecast the path of the virus, but it increases the chances the Federal Reserve will cut rates at least once more to provide some support to the economy.
References
Sarkar.” U.S economy to dodge coronavirus blow, but risks to Downside: Reuters poll” Reuters .20 February 2020
Kihara and Leussink.’’Japan on brink of recession as economy contracts, virus heightens risk’’ Reuters .17 February 2020
Koranyi.’’German growth to remain weak in first quarter as coronavirus hits: Bundesbank’’ Reuters .17 February 2020
Jiang and Goh.” Chinese doctors ’using plasma therapy’ on coronavirus patients’’ Reuters .17 February 2020
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