The Effect Of Coronavirus On The Stock Market

The stock market is the largest economic market in the world. It is often seen as the stand-in-for economy in most countries, especially the US. It is therefore expected that with the recent breakout of coronavirus in China and its deadly force in the country, the stock market would be most affected.

However, before the increasing fear of the outbreak, the US stock market has continued to thrive despite the turmoil. Just early this year, the US stock market recorded the highest stock gain since August 2019.

Major Concern

As coronavirus increases, the rate of fear for the market also increases. Currently, coronavirus has killed more than 550 persons and infected more than 28,000. 

In Wuhan, the place where the virus is believed to have emanated from, businesses and markets have been shut down. Also, across the country of China, markets have continued to suffer. For instance, the supply of the world chain has been terminated, airlines have canceled flights to and from China, provinces like Hubei have been sealed off completely,  entries areas to the country have been quarantined, and as these restrictions continue to increase, more and more customers are locked up in their houses.

Added to this, casino gambling in places like Mecca was affected for two weeks. After the closedown of more than half stalls in China, Nike Inc, NKE +0.8% was the first to warn against the dwindling impact of the virus on business

Economic Impact

On the economic impact of the virus, economist analysts already predicted that the virus would reduce China's first-quarter real gross domestic product growth from its current 6% to 4.5%. In relation to this, the importance of the country of China to consumer goods cannot be underrated. Their important role in global manufacturing and trade had also left some worries.

Significantly, S&P Global predicted that the virus would affect companies that deal with the manufacturing of goods due to the current disruption of China factories. Also, growth in the UK and the Eurozone would also be affected. This could be 0.2% lower than expected this year. 

As a result, the spillover effect of the virus on the United States is likely to cause a reduction in the country's first-quarter GDP from 0.4 to 0.5 percent.

It was also predicted by Reuters that exports and imports business would reduce drastically in the country of China. Analysts also reveal that the virus outbreak could have a long term negative effect on China's global trade. 

Safe Haven

Looking at the current state of the US stock market, it would be very difficult to believe that the virus poses any threat to the country's economy. This is why US asset is often believed to behave less like risk asset and more like a safe haven. 

At the recent stage of the virus, many believed the best way to stay safe is to sell their stocks while some persons believe the way out is to buy more stocks. Whichever way, containing the disease is the plausible way forward.