How Will The "Corona" Virus Affect The Global Economy?
Coronavirus, which worried the world, affected everything from business to travel. The impact of the virus on the global economy is noticeable, as reports of infections outside China have greatly affected markets around the world. However, we still have to see the full picture of its economic implications.
One of the primary instances of the effect of the infection is the dropping of the Mobile World Congress in Barcelona (MWC), which is viewed as a worldwide occasion on portable innovation, and its crossing out will without doubt influence organizations that intend to disclose their most recent issues and declare them at the meeting.
So far, the number of HIV infections has exceeded 100,000 cases worldwide, with the vast majority in China, where the virus is believed to have originated. Among the injured. But what next? How will the virus affect the global economy?
China sneezed and the world caught a cold
China is the second-largest economy in the world by GDP and the backbone of global manufacturing. In fact, it is the fastest country ever to reach second place, with the United States taking center stage.
Many companies within different sectors around the world depend on Chinese manufacturing, and many international companies have production facilities and factories in China, so it is no wonder that the impact of the Coronavirus is profound on the performance of the most powerful companies and brands in the world.
Many brands such as sporting goods manufacturers Nike and Adidas are also heavily dependent on their income from retailing in China. Nike, for example, produces 20% of its products in China and 17% of its revenue comes from sales in China. This means that the impact of the virus on production in China is spreading far beyond the country's borders.
On the other hand, the epidemic has affected travel to and from China, as many airlines canceled their flights to China. This resulted in a 55% decrease in passenger numbers compared to last year. This not only hurts the travel industry by canceling flights and hotel reservations but also drastically reduces the country's tourism spending.
Corona and its impact on the performance of financial markets
When reports of a deadly new virus surfaced in late January, financial markets initially panicked. Markets in China, which were just returning from the Chinese New Year holidays, fell 10%, as several indices and ETFs showed massive declines. Moreover, industrial activity was paralyzed across the country. To maintain market equilibrium, Beijing pumped $ 174 billion into the market.
The impact was not limited to Asian markets, as many US-based companies depend on Chinese factories to manufacture their products. This has been seen particularly in the technology sector and that is why many tech stocks also experienced a drop in early February, dragging Wall Street's major indices down with them. Additionally, as China is the world's largest oil importer, black gold has also taken a heavy hit, down by nearly 16%.
Will Corona continue to affect the markets?
It is not entirely possible to predict how the virus will affect the markets. For now, markets around the world are in decline as more and more cases of the virus continue to be reported outside of China.
Currently, Wall Street is in a sharp downturn, as $ 1.77 trillion has been wiped from the SPX500 in just two days. The impact is not limited to the US and Asia, where the UK100, GER30 and FRA40 indices have also taken a big hit. Oil also suffered heavy losses, as it fell below the $ 50 level and reached price levels not seen since January of last year.
Whether or not the downtrend continues, investors and traders should be extra cautious at this time. High volatility may be tempting to speculate, but it can also bring significant risks to your capital.