it was a black week on the stock exchanges. The spread of the Coronavirus that triggered a worldwide sell-off. As measured by the MSCI All Country World Index, which tracks the performance of the largest companies from around fifty countries were destroyed in a week, approximately five trillion dollars of stock value. It is the biggest slump since October 2008.
It not only shares plunged courses: The price of Oil fell by almost 14 percent, the Bitcoin lost 10 percent, and even Gold declined by 3.5 percent. The fear of the Virus has replaced the greed in the markets.
China industry collapsed in February because of the epidemic as strong as ever, as released yesterday, the official purchasing managers ' index shows. Also yesterday, the British economic research Institute Oxford Economics, has published its new forecast. It assumes that the epidemic will have large, but short-lived effects, with a focus on China. The world's gross domestic product would be reduced accordingly in the first quarter on a seasonally adjusted basis – the first quarter slump since the financial crisis.
development is, however, a global pandemic would reduce global growth in the first half of the year to almost zero. For the whole year, the global gross domestic product would be 1.1 trillion dollars, or 1.3 percent, below the current forecast. The United States and the Euro area would fall in the first half of the year, in a recession, followed by a rapid recovery followed.
Growing fear of attacks on the United States
in fact, the economic shock waves are becoming increasingly clear. Hotel chains, airlines, car manufacturers or shipping companies will feel the impact of a decline in bookings. Delivery problems in the industry, the cancellation of travel and trade fairs such as the Geneva motor show will lead to a decline in sales and a swirl of business plans. "You have to assume that the situation will be worsened, and the uncertainty is growing," said Daniel Hartmann, chief economist at Bantleon Bank in Zug. "We see ourselves forced to revise our forecasts downwards and expect that the Eurozone will shrink in the second quarter."
for the USA, analysts see clouds on the horizon. The former US Central Bank boss Janet Yellen holds it for possible that the United States slides into a recession, should spread the Virus further, and Europe is economically strong.
In the normal case, a temporary event triggers no recession, just as natural disasters or terrorist attacks. However, the high level of uncertainty, increasing anxiety and panic in the financial markets the result is a toxic mixture.
According to according to the demands for the Intervention of the state. "The call for the Central banks is an almost reflex-like reaction. The financial markets it is usual that the Central banks step in when the stock markets dive," says Hartmann.
In the futures markets is already expected that the US Central Bank, the Fed, interest rates at its next meeting on 18. March will reduce The likelihood of a reduction in interest rates soared yesterday high at 95 percent. Fed Chairman Jerome Powell released a statement on Friday. The Coronavirus is a "growing threat to the economic activities". The Fed is watching the development, and the effects. "We will act appropriately to support the economy." One could ask whether an interest rate reduction in the case of a pandemic, could ever make a difference, said Daniel Hartmann. "But it's all about sending a Signal: "Yes, we take this seriously, we do something."" So the Fed responded by the end of 2018 and a turn in interest rate policy announced, as the stock markets fell.
The opinions on the effectiveness of cuts in interest rates are divided. Ed Yardeni, President of Yardeni Research, and Nouriel Roubini of the Stern Business School in New York don't think much of it. A reduction in interest rates slows down, neither the spread of the epidemic, nor to relieve the chains of the problems with production outages and intermittent supply. But it signals the Central Bank's help to strengthen the confidence of companies and consumers, and to dampen fears of a recession.
Because a further reduction in the key interest rates in the Eurozone on a large resistance is encountered, attributed to Bantleon chief economist Hartmann, the European securities purchase the Central Bank's President, Christine Lagarde, the program will re-expand, for example, from 20 billion to 40 or 50 billion euros per month.
Visible for citizens and economic programs
In Switzerland, the Swiss national Bank (SNB) to prevent, under the leadership of Thomas Jordan with foreign exchange interventions, a strengthening of the Swiss franc. This is probably the main reason that the Euro exchange rate has not fallen below 1.06 francs. Fritz Zurbrügg, Vice-President of the national Bank, confirmed yesterday in the "Finance and economy" the willingness to go if necessary, even more: "Should we come to the conclusion that monetary conditions need to be adjusted, we will reduce the SNB's key interest rate further."
Several governments to take measures to the economic setbacks cushion. Hong Kong announced tax relief for workers and pays each adult citizen 10'000 Hong Kong dollars (about 1240 francs). Singapore is launching a stimulus program in the amount of $ 4.6 billion, and South Korea plans to state aid in the amount of 10 billion dollars. Italy asks the EU for financial aid and an easing of the Maastricht criteria, the public deficit for the combat a recession, to boot.
Switzerland and Germany with short-time work is a tool for such crises. It acts immediately and accurately in the companies that are most affected. "We have seen in the financial crisis of 2009 and during the Euro crisis of 2011, this Instrument works very well," says Rudolf Minsch, chief economist of the business Association Economiesuisse. Compared to more claims will go to the support of companies or industries, he remains skeptical: "We should now wait and see how the Situation develops further."
hope for the Best, for the worst plan: not only on the stock exchanges of the currency in the face of fast-spreading Coronavirus epidemic.
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Created: 01.03.2020, 12:00 PMUpdated Date: 02 March 2020, 07:01