Published on : 03/15/2020 – 08:13Modified : 3/15/2020 – 11:45
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The coronavirus and its economic consequences have routed the stock markets this week. March 12 was the worst day after Donald Trump’s decision to ban Europeans from the United States to prevent the spread of the virus. Wall Street experienced its worst session since 1987. Same fall in Europe and Asia. If the markets recovered on March 13, no one can predict when the tumble will end.
Global stock markets are collapsing as restrictive measures due to the coronavirus are increasing in Europe and worldwide, suggesting a slowdown in developed economies. The wind of panic spares no sector, air transport, banks, hotels, or oil prices at their lowest level in ten years. Faced with this panic, the European Central Bank (ECB) provides a coherent response to save SMEs, according to analyst Pierre Schoeffler, asset allocation advisor on the financial markets.
” Central banks are doing their best today, that is, everyone has been disappointed that the ECB is not cutting rates, he explains. But the key rates are already at minus 0.5%. In fact, the ECB gave the right signal I would say. She said : I will make sure that the bank liquidity is assured. Very important because the disease must not spread to the banks. Because when the banks start to fail, we have a real big problem on the economy. So the ECB said : I will make the banking system work. And the ECB also said a second thing : I make sure that SMEs have what it takes to be able to handle the shock. So obviously, SMEs will borrow to make up the shortfall. They may borrow at 0%. But the problem is, it is a loan and it may still have to be repaid one day. Either way, everyone will come out of there with more debt whether it be states or businesses, and therefore more weakened “
Violent return to reality
Central banks in the United States and Europe may intervene to reassure, nothing helps. The stock markets were dominated this week by panic. Everyone sells everything at the same time, which resulted in two crashes in a week.
This is a violent return to reality after a year of almost uninterrupted growth for the markets. ” At first, people said to themselves, it will be contained so not really big problems, explains Philippe Lhermie, trade and founder of the specialized site traderchange.com. Then there, they are realizing that this is a real pandemic and that ultimately, it will impact all economies, and not only the Chinese economy, because the traders saw it in terms of economics, they didn’t see it in terms of disease, not in health terms at first. Whereas now they see it in health terms. So this is not the central banks that will help “
The message slipped by Christine Lagarde, the president of the European Central Bank, irritated more than one government. Monetary tools are of little weight in the face of the double shock of supply and demand. However, the coronavirus has not finished blocking production chains or confining people to their homes. Even with a rain of liquidity, it is not exactly the ideal context for investing.
►Read also: How to cushion the slowdown in the economy caused by the coronavirus?
