Economic turmoil associated with the COVID-19 pandemic has wide-ranging and severe impacts upon financial markets, including stock, bond, and commodity (including crude oil and gold) markets. Major events included a described Russia–Saudi Arabia oil price war after failing to reach an OPEC+agreement that resulted in a collapse of crude oil prices and a stock market crash in March 2020. The effects upon markets are part of the coronavirus recession and among the many socio-economic impacts of the pandemic.
As coronavirus put Europe and the United States in virtual lockdown, financial economists, credit rating and country risk experts have scrambled to rearrange their assessments in light of the unprecedented geo-economic challenges posed by the crisis. M. Nicolas Firzli, a director of the World Pensions Council (WPC) and advisory board member at the World Bank Global Infrastructure Facility, refers to it as “the Greater Financial Crisis” and says it is bringing to the surface many pent-up financial and geopolitical dysfunctions.
At the international and national levels, however—as Helmut Ettl, head of the Austrian financial market authority, said—there is no reliable empirical data to gauge the ongoing effects of the COVID-19 disease on the economy and the environment, as this type of crisis is unprecedented. Companies that were already financially weak before the crisis are now further destabilized. All that is known, Ettl said, is that the crisis will be profound.
Individuals who have continued to shop during the COVID-19 pandemic are at an increased risk of contracting COVID-19.Amidst the pandemic, grocery stores and pharmacies continue to remain open and attract crowds of shoppers, thus creating the potential to further spread contagion. Shoppers using paper money to make purchases may further be disseminating the coronavirus, according to the World Health Organisation. Bank branches that continue to remain open amidst the COVID-19 pandemic pose a health risk as the gathering of people allows for the spread of contagion.
On the morning of 9 March, the S&P 500 fell 7% in four minutes after the exchange opened, triggering a circuit breaker for the first time since the financial crisis of 2007–08 and halting trading for 15 minutes. At the end of trading, stock markets worldwide saw massive declines (with the STOXX Europe 600 falling to more than 20% below its peak earlier in the year), with the Dow Jones Industrial Average eclipsing the previous one-day decline record on 27 February by falling 2,014 points (or 7.8%).The yield on 10-year and 30-year U.S. Treasury securities hit new record lows, with the 30-year securities falling below 1% for the first time in history.
On 12 March, Asia-Pacific stock markets closed down (with the Nikkei 225 of the Tokyo Stock Exchange also falling to more than 20% below its 52-week high), European stock markets closed down 11% (their worst one-day decline in history), while the Dow Jones Industrial Average closed down an additional 10% (eclipsing the one-day record set on 9 March), the NASDAQ Composite was down 9.4%, and the S&P 500 was down 9.5% (with the NASDAQ and S&P 500 also falling to more than 20% below their peaks), and the declines activated the trading curb at the New York Stock Exchange for the second time that week.
Oil prices dropped by 8%, while the yields on 10-year and 30-year U.S. Treasury securities increased to 0.86% and 1.45% (and their yield curve finished normal).On 15 March, the Fed cut its benchmark interest rate by a full percentage point, to a target range of 0 to 0.25%. However, in response, futures on the S&P 500 and crude oil dropped on continued market worries.
The reduction in the demand for travel and the lack of factory activity due to the outbreak significantly impacted demand for oil, causing its price to fall. In mid-February, the International Energy Agency forecasted that oil demand growth in 2020 would be the smallest since 2011. Chinese demand slump resulted in a meeting of the Organization of Petroleum Exporting Countries (OPEC) to discuss a potential cut in production to balance the loss in demand.