Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013

32388

Economic fears spreading like a virus

RELATED TOPICS​

Chris Towner, Director at Chatham Financial comments on the current market turmoil caused by Covid-19 concrens…

Chris Towner, Director at Chatham Financial comments on the current market turmoil caused by Covid-19 concrens…The coronavirus is spreading globally and with it, economic fears are spreading also. Fear often comes from dealing with the unknown and it is the unknown scale of the impact of the virus that is putting pressure on the financial markets. For those that have been in the market for a while comparisons are already being made to the financial crisis of 2008 and 2009. Trade and travel are the first targets as restrictions are implemented. This has hit oil as well as share prices and the real question is how much more of a negative impact can this virus have and for how much longer?

In the FX markets, the US dollar has weakened against the euro as proportionately this currency had the most to lose. Attractive interest rates of 2.25-2.50% in the first half of 2019 have now been replaced with rates of 1% and expectations of further 50 to 75bps of cuts. This would bring US rates back down to where they were at the start of the cycle (their historical lows). Compare this with the ECB that has practically no more room to cut rates from its current level of -0.50%. Rates in the euro area have been at these emergency levels for a long time, now forcing the ECB to push back at EU leaders to start stimulating their economies. The coronavirus has been the obvious catalyst for this debate; however, it arguably is too little, too late.
 
As is always the case with financial crises, the more vulnerable economies such as emerging markets are hit hardest, as well as those economies that rely on oil revenues given oil prices have slumped by 30% over the weekend.
 
A significant jump in the number of new infections will lead to further volatility, whereas the first signs of containment should give markets a welcome bounce. One thing for certain is that until the outlook becomes clearer, volatility is here to stay.

Latest News

MSCI has announced the launch of MSCI Private Capital Indexes, writing that with growing investor..
GAM Investments and Sun Hung Kai & Co, a Hong Kong-based alternative investment firm, are..
PwC’s Global Entertainment & Media Outlook 2024-28, covering 13 sectors across 53 countries and territories,..

Related Articles

Rod Ringrow, Invesco
Geopolitical tension has surpassed inflation as the primary concern of sovereign investors and is prompting greater interest in allocating to emerging markets, according to the twelfth annual Invesco Global Sovereign Asset Management Study...
Geopolitical tension has surpassed inflation as the primary concern of sovereign investors and is prompting greater interest in allocating to..
Green energy
2024 has been the strongest ever year for green bond sales, with deals topping USD356 billion in the first six months, according to research from Bloomberg...
2024 has been the strongest ever year for green bond sales, with deals topping USD356 billion in the first six..
infrastructure headline
The new Labour government has launched a GBP7.3 billion National Wealth Fund which will target private capital to support the UK’s growth ambitions...
The new Labour government has launched a GBP7.3 billion National Wealth Fund which will target private capital to support the..
Tom McPhail, lang cat
Today’s news of a landslide victory from the UK’s Labour party, finds that the markets had mostly factored in a widely predicted Labour win...
Today’s news of a landslide victory from the UK’s Labour party, finds that the markets had mostly factored in a..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by