US stocks were down nearly 7% when the market opened on Monday earlier this week. This was the worst day of trading since the 2008 financial crisis, and the losses were occasioned by two key factors. The spreading coronavirus crisis, in particular, seemed to have sent investors into a panic as the United States continued to report more cases in the country. The situation was made worse by the declining oil prices that hit a historical low on Monday.
All the three major US indices saw major drops in early Monday trading as Wall Street tried to make sense of the oil crisis that was first reported on Saturday last week. Saudi Arabia, one of the biggest oil producers in the world, announced sudden price cuts in all its oil exports. The move had a massive ripple effect on global oil prices. The price of a single barrel went on a free fall, hitting the lowest value since 1991.
The markets were also reeling from growing investor concerns about the growing epidemic of the coronavirus. Various states in the US including New York, Florida, and California had reported growing cases of the virus. The US death toll is already into double figures with experts warning that the spread could get worse over the coming few months. There has also been growing criticism about how the White House has handled the pandemic so far.
The Trump administration had earlier noted that the reported cases were under control but it later emerged that the position of the scientists was different. In his address to the nation, president Donald Trump assured the public that his administration was doing everything possible to contain the spread of the virus. The president also hinted at undertaking several stimulus plans that would help safeguard the economy against the disruption of the disease.
According to recent data, so far, coronavirus has killed over 3,800 people, mostly in China. There are over 110,000 confirmed cases globally as well. The only piece of good news so far is the fact that new infections in China have been declining as Beijing continues to enforce strict containment measures. China is largely seen as the origin of the virus but even as it puts its crisis under control, there’s a real risk that things could get worse in other countries.
Italy, the hardest-hit European country, has already enforced a nationwide lockdown in an effort to stop the spread. The US has also suspended all flights into the country as part of early countermeasures. But it’s clear that investors are worried about the possible impacts that the pandemic could have on markets. It may reach a point though where an elaborate stimulus will be needed to address the economic risks posed by the virus.
The Bank of England announced that it will be cutting interest rates as part of an elaborate stimulus package that will help protect businesses against the economic effects of coronavirus. We are also expecting the US to follow suit but nothing concrete has been said yet by the White House.
