Market Sentiment Turned Sour Amid Coronavirus

The Covid-19 (coronavirus) that is now spreading across the whole world had dampened market sentiment, with market participants refraining themselves from investing in an uncertain market situation. The outbreak of the virus, which previously affected China significantly, is now claiming lives outside of China. As of today, South Korea reported a total of 12 deaths; 11 in Italy and 16 in Iran.

China’s economy suffered drastically, impacting the daily routines of its people as they isolate themselves as a precaution towards the virus. Factories, schools, and businesses are forced to close down temporarily as the country braced itself to battle the epidemic. Economic activity continues to decline as other countries attempt to cut ties temporarily with China, halting exports & imports to and from the country; Transportation to and from China are also being restricted.

The impact can also be seen in China’s major trading partners, Australia and New Zealand, whose economy depending heavily on their exports to China. As production and transportation slides, so does the consumption of crude oil, heightening concerns towards global demand growth. That said, the recent fall in oil prices could not find support from supply disruptions in Libya and OPEC+ production cuts. 

As the epidemic now turning into a pandemic, even the resilience of the US economy is being questioned. Yesterday’s release of consumer confidence data from the US missed its expectation, signaling the possible impact of the virus towards the US economic outlook. US stock markets were also suffering, with the Dow Jones and Nasdaq both plunging more than 5% over the span of two days.

Furthermore, as we look into safe-haven markets, gold, and the dollar index, both are losing their upward momentum despite the uncertainties in the market. Some analysts are arguing that recent retrace in both the market is mostly due to profit-taking by investors after an over-extended rally last week. However, safe-haven should be gaining by the significant plunge in stock markets. We can now observe the seriousness of uncertainties in the market and the impact it has on the recent market’s irregular movement. 

As the world is now at war with the virus, one can only pray and hope for a cure and vaccine to be discovered and for things to get back to normal.

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