COVID-19: red remains on the stock market

In the absence of reassuring news on the health front, the stock markets could not raise their heads Monday morning, very worried about the consequences of the coronavirus pandemic on the world economy.
E mboiding the pace on Wall Street, Asia gave in to pessimism, Tokyo notably losing 1.57% at the close.

Europe was following the same trajectory. Around 11:10 a.m. (5:10 a.m. in Quebec), Paris fell by 1.02%, London by 1.60% and Frankfurt by 0.52%. Milan fell 0.64% while Madrid sank 2.43%.

“The recent stock market rebound stopped on Friday with indices down 4.2% in Europe and 3.4% in the United States,” said in a note Esty Dwek, director of market strategy. at Natixis IM Solutions.

“Although the stimulus announcements have helped to ease some of the recent panic, the epidemic continues to worsen at this time and investors cannot assess the magnitude of the economic impact until we know how much long it will last, “she said, adding that” downside risks and high volatility will persist “.

To cope with the economic consequences of the crisis, central banks and governments “have announced plans of a magnitude beyond measure,” said John Plassard, investment specialist at Mirabaud.

Donald Trump promulgated a US $ 2.2 trillion stimulus package on Friday to try to avoid a plunge in the U.S. economy into a lasting recession. It is the largest package of measures ever adopted in the United States.

The 27 countries of the European Union, on the other hand, fail to agree on a strong common financial response, the countries of the South denouncing the danger of selfishness by those of the North for the future of Europe.

“Additional” impact on businesses

“The main discussion seems to relate to a form of mutual obligation or debt called Coronabond, with Italy and Spain in favor, the Netherlands, Austria and Germany opposing it”, analyzed Michael Hewson, analyst at CMC Markets.

But “in the absence of consensus, most countries are adopting their own measures to deal with the crisis, while infection and mortality rates continue to rise, with Spain and Italy being the most affected “, He continued.

“The multiplication of cases of coronavirus […] in the United States, which seem overwhelmed by the situation” is also “an element of concern” for the markets, added John Plassard.

The United States has the highest number of confirmed cases, approximately 140,000.

At least 715,204 cases of infection, including 33,568 deaths, have been recorded in 183 countries and territories, including the United States, according to a count made by AFP from official sources on Monday.

With nearly 25,000 dead, Europe is the continent hardest hit. Without a proven vaccine or treatment for COVID-19 disease, more than three billion people remain confined.

“It is becoming increasingly clear that the containment measures currently in place across Europe will have to be extended for much of the summer, which will have an additional impact on business activity,” warned Michael. Hewson.

Against this backdrop, oil prices were “at their lowest level in 17 years, with storage capacity continuing to fill, while global demand is collapsing,” he said.

The price of West Texas Intermediate (WTI) crude, benchmark in the United States, lost 5.3% to US $ 20 per barrel, while the price of a barrel of Brent North Sea was US $ 23, down 6.5% Monday in Asian markets, levels never seen since 2003.

On the currency side, the European currency weakened against the dollar. Around 11 a.m. in Paris, the euro lost 0.44% against the greenback, at US $ 1.1092.

On the debt market, 10-year rates in European countries were stable.

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