The Econ-versation: Global stock market trouble amidst coronavirus outbreak

Silvia Buonocore, Senior Writer

Early this past week, stock markets around the world saw sharp drops as investors worry about global growth with the coronavirus showing no sign of slowing. As tensions eased between China and the United States, many expected a good year for the economy; however, with difficulty in containing the coronavirus, there is less hope for stabilization.

On Monday, Feb. 24, following reports of more infections in both Italy and South Korea, the American stock market had its worst day in over two years. The S&P 500, an index measuring the top 500 companies in the United States, fell by 3.4 percent.

The stock market continued to fall on Tuesday as the S&P 500 closed the day with a 3.15 percent drop. The energy and materials sectors were the main drivers of the drop as these sectors are closely tied to Chinese demand.

Additionally, the 10-year Treasury note, used as a benchmark for many interest rates such as those for mortgages and student loans, hit an all-time low of 1.31 percent. The day finished with the 10-year Treasury note at 1.328 percent.

The continued spread further proves the difficulty to stop the virus, which places investors in the face of contracting consumer demand and damage to global supply chains. Additionally, the new cases in Italy are likely to cause declines in consumer and business confidence across Europe.

Other countries experienced stock market drops on Tuesday as well. Germany’s DAX, a measure of the country’s 30 largest companies, and Britain’s FTSE 100, a measure of the country’s top 100 companies, both fell by more than one percent. Furthermore, Australia’s stock market fell by 1.6 percent and the Nikkei 225 index, measuring Japan’s top 225 companies, fell by 3.3 percent. Interestingly, South Korea’s share prices rebounded, despite the country having the second largest number of reported cases following China.

With the warning on Tuesday that the United States should prepare for more coronavirus outbreaks, the economy is likely about to embark on an uncertain and bumpy future. While the Federal Reserve is monitoring the coronavirus outbreak closely, the power of lowering interest rates may only go so far if the main issues lie in decreased production and disrupted supply chains.

This information originally appeared in The New York Times and The Wall Street Journal.

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