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Coronavirus crisis and the financial market shocks explained.
In December 2019, the first cases of infection from a novel coronavirus were treated in Wuhan, China. The race to contain the spread began, eventually leading to global lockdowns, business closures, and financial market turmoil.
We take a closer look at the effect of the coronavirus pandemic on the global economy.
- Mid-January 2020: The first known death from an illness caused by the novel coronavirus reported by Chinese state media.
- End-January 2020: Chinese New Year celebrations cancelled throughout China. Travelling between provinces suspended; businesses and factories closed on a large scale. Cities and provinces shuttered in an urgent attempt to contain the spread of coronavirus.
- February 2020: The World Health Organization officially names the disease coronavirus causes as COVID-19. Asian stock markets fall sharply on fears related to the virus impact on the economy. The S&P 500 reaches all-time high on February 19 at 3,386 points. Italy introduces strict measures for the northern region of the country. Signs of funding stress appear as companies begin to lose revenues. Disrupted manufacturing supply chains induce a supply shock followed by demand shocks as consumption of goods and services is reduced.
- March 2020: Companies begin to borrow and start selling assets to maintain liquidity. Italy imposes a countrywide quarantine. Oil prices collapse on March 9, falling by 25% in a single day – the largest drop since 1990 – and the S&P 500 closes down 7.6% in a historically bad day in financial markets. As the major economies contract, bouts of severe weakness follow in financial markets as fear spreads. This is exaggerated by leveraged investors, whose margin accounts fall below their brokers' required amount, forcing them to sell assets to avoid further margin calls. France announces national lockdown followed by closures of schools and businesses for many European countries in a bid to flatten the curve of infections. Massive liquidity injections by the US Federal Reserve and the European Central Bank. Governments in Europe step in and respond with significant fiscal stimulus packages followed by the USA to help companies stay solvent and limit the damage to economies.
- April and beyond: Only once the number of infections decreases and people return to work can companies resume productivity, consumption levels return and economies recover.