Black week for the stock exchanges, which had not seen this since 2008

At the close on Friday, Paris was down 3.38%, London by 3.18%, Frankfurt by 3.86%, Madrid by 2.92% and Amsterdam by 3.68%. In Zurich, the SMI lost 3.67%.

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Winds of panic continued to sweep the world’s stock markets on Friday, distrust of panicking investors with potentially devastating consequences for the global economy from the coronavirus epidemic.

Asian markets were hit hard on Friday, dragging European markets in their wake. The losses recorded by the major European stock indexes since last Friday, around 12% -13%, are the largest since the financial crisis of 2008-2009, when the world economy entered a recession.

At the close on Friday, Paris was down 3.38%, London by 3.18%, Frankfurt by 3.86%, Madrid by 2.92% and Amsterdam by 3.68%. In Zurich, the SMI lost 3.67%.

If we take as a starting point the highest levels in which the markets were still located a week ago, “arriving at more than 10% decline in less than six days, this has never happened since 1946”, recalls to AFP Wilfrid Galand, director strategist of Montpensier Finance.

The US markets accelerated sharply downward Thursday evening, due to fears that the United States would be affected in turn, and distrust continued on Friday, the Dow Jones falling 2.70%, the Nasdaq by 1 , 39% and the expanded S&P 500 index of 2.24%, around 5:20 GMT.

There are other signs of the worst, such as the level of the VIX volatility index (or “fear index”), at its highest since 2011, when there was a public debt crisis in the euro area.

“The speed, the power of this fall surprised many people,” said Mr. Galand, while so far, the markets have been rather calm, supported by a certain economic recovery, the action of central banks, the signature the Sino-American trade agreement or the results of companies “much better than expected”.

“What is now certain and certain is that we are in an economic shock. We know that this will lead to a downward revision of corporate profits for the year 2020, which will be sealed, “Christian Parisot, chief economist of broker Aurel BGC, told AFP.

According to several analysts, it is less the health seriousness of the epidemic as such that worries that the measures taken to contain it, which are particularly damaging for the world economy.

“Much darker scenario?”

Now, “the real question is whether this economic shock is punctual with a restart or if we are really in the process of setting up a much darker scenario,” added Mr. Parisot.

If China was until recently the only global center for coronaviruses, the risk has increased with the emergence of new source countries such as South Korea, Iran and Italy. First cases again appeared on Friday in the Netherlands, Nigeria and New Zealand.

The World Health Organization (WHO) announced Friday that it has raised the threat from the new coronavirus to “very high”, which has infected some 79,000 people in China and more than 5,000 worldwide.

EU health ministers are scheduled to meet in Brussels on March 6 “to discuss measures regarding the coronavirus,” a European Council spokesman said on Twitter on Friday.

In this context of acute risk aversion, investors are turning to safe havens, first among which are German and American ten-year government bonds: the first shows a rate at the lowest since early September, the second at its historic floor.

Now, “the real question mark is what will be the attitude of the authorities in the United States” because in the event of an explosion in the number of cases across the Atlantic, it will be “still complicated to keep the markets” , for M. Galand.

But the specter of the 2008 financial crisis still remains far away. This epidemic has a “cost perhaps higher than it was estimated and that justifies that the markets adjust” but all that remains still “quantifiable”, relativizes Mr. Parisot. “I do not believe in the risk of a (financial) crisis, I think that the central bankers will make sure that we do not arrive at this scenario.”

However, the US Central Bank (Fed) said on Friday that it does not favor the scenario of an emergency rate cut at this stage.

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