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Panic attack: what triggered a collapse in the global stock market

2020-02-26T23:21:42.163Z

The global stock market has been falling rapidly since the beginning of the week. In most countries of the world, stock indices updated the lows of recent months. At the same time, in the USA, the rate of decline in indicators became the highest in two years. Experts say the news about outbreaks of coronavirus outside of China triggered a panic among investors. Although investors previously considered the United States a country less susceptible to infection, the US National Center for Immunization and Respiratory Diseases warned of the inevitable spread of the disease in the country. According to analysts, the current state of affairs may undermine the position of the dollar as a defensive asset.



On Wednesday, February 26, trading on the global stock market is accompanied by a drop in stock quotes. Following the Asian session, the Shanghai SSE Composite index fell 0.83% (to 2988 points), South Korean KOSPI sank 1.28% and for the first time since December 2019 fell below 2077 points. At the same time, the Japanese Nikkei indicator lost 0.79% and fell to 22,426 points - the lowest level in the last four months.

Securities are getting cheaper on European markets. In the middle of trading, the German DAX index fell 1.82% to 12 557 points, and the French CAC 40 - 1.15% to 5614 points. The last time similar levels could be observed back in October 2019. At the same time, the English FTSE 100 indicator fell 1% and for the first time in a year reached 6949 points.

Quotes in Europe and Asia are falling after a record collapse of the US stock market. On Tuesday, February 25, in the US, the Dow Jones industrial index crashed by 3.15% (to 27,081 points). At the same time, since the beginning of the week, the indicator has fallen by almost 6.6%. This two-day drop was the highest since February 2018.

Interviewed RT experts associate market panic with news about the spread of coronavirus. So, global investors fear the negative impact of the disease on the global economy.

“No one has an understanding of how long the epidemic can last. Previously, cases of the disease were mainly recorded in Asia, but recently it became known about an outbreak of coronavirus in Italy. This has raised investor concerns about the further spread of the infection to other European countries. The European economy is going through hard times, and an epidemic can hit it even harder, ”said Vyacheslav Abramov, director of the BCS Broker sales office, in an interview with RT.

  • Reuters
  • © Kim Hong-Ji

Recall that at the end of December 2019, authorities in Chinese Wuhan reported an outbreak of a respiratory infection of unknown origin. According to local experts, the cause of the disease was a new type of coronavirus - 2019-nCoV. To date, according to the State Committee for Healthcare of China, the number of infected in China has exceeded 78 thousand, 2715 of them have died.

According to available estimates, the number of infected people in the world exceeded 81.2 thousand. Outside of mainland China, the most cases were recorded in South Korea (1261 people), Japan (877, including those infected from the Diamond Princess cruise ship) and Italy (374).

“First of all, the virus affects the automotive industry, aviation, tourism, luxury industries and retail amid falling demand from Chinese partners. Many large corporations have their own enterprises in China, and because of the epidemic, production in the country had to be stopped, which would have a negative effect, ”Abramov emphasized.

According to him, at the moment, China is still a key trading partner for many states. Thus, the observed decrease in production volumes risks leading to a decrease in global trade and a slowdown in the global economy.

“So far, according to preliminary estimates, because of the coronavirus already in 2020, the global economy could lose about 1.3% or more than $ 1 trillion,” the analyst added.

Confidence decline

According to experts, statements by American officials about the outbreak of coronavirus in the United States also became a cause for concern for global investors. So, on February 25, the director of the National Center for Immunization and Respiratory Diseases of the States, Nancy Messonier, called the spread of the disease in the country only a matter of time. According to her, the Americans should "prepare for the fact that the situation may be difficult."

“Ultimately, we expect to see the spread of (disease. - RT ) in the United States. It’s not about whether this will happen, but about when it will happen, and how many people in this country will have serious consequences, ”TASS quoted Messonier as saying.

Earlier, global investors considered the United States a country less affected by the coronavirus and actively bought the country's dollar-denominated government securities. As explained by RT portfolio manager of QBF Denis Ikonnikov, traditionally, during the growth of uncertainty in the world, players invest in gold and US debt bonds as a reliable means to save money.

  • © ADEK BERRY / AFP

In mid-February, growing demand for treasury from global investors triggered a record strengthening of the dollar on the world market. So, on February 21, the corresponding DXY index for the first time since 2017 rose to the level of 99.9 points. Meanwhile, after the statements of Nancy Messonier at the auction on February 26, the indicator fell below 99 points.

“Investors could react negatively to the statement of the American authorities. But I don’t exclude the possibility that Donald Trump will try to calm the markets tonight and encourage investors to reduce panic, ”Ikonnikov said.

Meanwhile, the possible spread of coronavirus in the United States may be one of the factors that reduce confidence in the dollar in the long run, as a protective asset. About this in an interview with RT told the deputy head of the information and analytical center "Alpari" Natalia Milchakova.

“Given the likely outbreak of a coronavirus into a pandemic, we can say that almost no financial asset is already safe for saving money. Relative reliability is still retained only by gold amid the fact that many countries are abandoning dollar reserves and are being transferred to precious metals, ”the expert explained.

Source: russiart

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