The impact of COVID on financial markets all around the world has been pretty bad. The growth rate of Gross Domestic Product (GDP) has fallen drastically as all the business sectors, whether restaurants or resorts, had to be completely shut down. Novel coronavirus spreads faster than any other virus in the history of flues and epidemic. The virus first hit the ground in February, and from March most of the world was under strict lockdown. All kinds of business sectors, small or big, were closed. Small or middle businesses suffered the most during this economic crunch.
How is China Finance Market Affected by COVID?
The effect of imports to China has directly affected the exports of most countries around the globe. More than 460,000 businesses were closed. These businesses account for 60 percent of China’s total GDP. The oil sector faced the worst adversity, as the country has the highest export of oil, LNG, agricultural goods in the world market. The country takes away 10% of the world’s demand for crude oil.
Data Analysis How Covid-19 Affected the World Financial Markets
While the chemical and telecommunication industries did not show any significant change in revenues, the same could not be said for other sectors. Consumer goods and automobile industry, global financial markets decline 5-6%, showed the impact on the coronavirus. However, the mining and travel industries suffered a drop of over 13%. Real Estate, on the other hand, faced a rise of about 10% in their net revenue.
The Increase in Financial Risks Due to COVID-19
The risk levels for all countries in financial markets caused by Covid-19 have increased from 0.0071 in February to 0.0196 in March, which counts four times more. The US market volatility has increased the most in the meantime. The standard deviation ranking in March is roughly accordant with the ranking of confirmed cases, excluding China. So, it is clear that the epidemic has led to significant risk in financial markets due to coronavirus.
Central Bank Interventions
To better the situation the central banks around the world have decided to intervene and support in different ways to provide fiscal help.
In the process, the US Federal Reserve cut down the interest rate by 50 basis points, to a range of 1% to 1.25%. The Bank of Japan and England have decided to monitor the markets closely and secure financial stability. The Gulf Countries’ Central banks have cut interest rates by 0.5% to combat the financial losses caused by Covid-19.
While in Turkey, the coronavirus pandemics effect on financial markets began to strike entirely in April. Interest rates were lowered to 8.25% in May by the Central Bank to maintain a steady flow of credit through the economy. The interest rate had been 12% in December 2019.
On the other hand, the International Monetary Fund (IMF) and World Bank issued a joint statement declaring that they are all set to help and “address the human tragedy and economic challenge” brought by the virus. The European Central bank claimed to have been ready for the economy’s slowdown.
The biggest fear concerning global economic risks due to covid-19 is that The Organization for Economic Co-operation and Development (OECD) has warned the pandemic outbreak could send the world GDP from the projected growth of 2.9%, down to 1.5%, cutting it half. Certain economies took severe damages and faced recession.
How Coronavirus has Changed the World Economy Forever
We discussed how the coronavirus outbreak has affected the financial markets on a larger scale. The worst thing which the pandemic has caused is, it changed certain things forever, which might affect the job market in the future. The robots have taken over in factories and service jobs which will make the laborers stay at home more. Due to this, there will be more inequalities within and among the countries. According to McKinsey and Company, the World Bank is already running in a deficit that adds up to $11 trillion this year, to pay the interventions.
Debts Due to the Pandemic
The governments offered credit to ease the businesses during the financial downturn caused by Covid-19 pandemic. Assets with a net worth of $3.36 trillion were borrowed within the first half of 2020, claimed by the Banks for International Settlements.
Poor countries lack resources to resume services and invest in vaccines, the way that wealthier countries have done. Third world countries need to tighten their belts or they might face currency risks and capital flight.
The World Bank warns that a new generation of deficit and economic turmoil caused by coronavirus is spawning. The IMF says that the developing nations may face a setback by a decade.
Women Participation in Financial Markets During Covid-19
Women have been seen to face the adversities disproportionately harder, as they are more likely to work with the extra child care responsibilities as the schools were closed during the lockdown. In Canada, women’s participation in the labor force dropped the lowest since the mid-1980s. The effects of 2020 pandemic on financial markets has had severe impact on all parts of the world.
The report of the UN Women Organization says that for the majority of women unpaid domestic work has exploded, forcing them to discontinue their jobs and services.
Though according to other reports, women’s participation in the equity share market has surged in India. Among them, 70 percent of women are homemakers and first-time investors. Upstox said it has seen a growth of 32 percent in the participation of women from April to June 2020 compared to the previous three months.
This article presents a draft on the effect of the coronavirus in the financial markets. The virus has already affected millions of lives and brought significant challenges to the world economy. The financial markets have seen drastic movement on an unprecedented scale. Presently, as we have seen the market risk has increased substantially in response to the pandemic, it has caused the markets to be very volatile and unpredictable. However, let us stay hopeful that the impact on global economy due to coronavirus pandemic does not cause too much harm.