Company / Analytics

Analytics, 15 March 2020

Week 11 in Brief

The week started with an oil price war between onetime allies Russia and Saudi Arabia. In the resulting conflict, oil prices suffered a historic collapse overnight, with US prices dropping as much as 34% to a four-year low of $27.34 a barrel as traders braced for Saudi Arabia to flood the market with crude in a bid to recapture market share. International benchmark Brent crude slid 9.4% to settle at $45.27 per barrel. Its session low was $45.18, which is a price not seen since June 2017. Prices rebounded by 5% after President Trump announced the United States will purchase oil for the strategic reserve.

Asian markets opened lower Monday and finished lower on Friday. At the close of trading on Friday, shares in Japan were leading the regional fall with the Nikkei 225 going down 6.08% while China’s Shanghai Composite was off 1.23% and Hong Kong’s Hang Seng went lower by 1.14%.

Markets across Europe crushed as the region became the epicentre of COVID-19. Following complete lockdowns in Italy earlier in the week and later in Denmark, as well as a ban on travels to Europe, European indices had their worst week since the outbreak of COVID-19. Though stocks closed higher on Friday, they were still down 19% on the week in worst sell-off since 2008. According to CNBC, the pan-European Stoxx 600 benchmark plunged 11% on Thursday to record its biggest one-day loss ever.

Perhaps the most surprising news of the week was U.S. President Donald Trump’s 30-day ban on travels originating from Continental Europe, except for the UK. The ban which took effect on Friday applies to anyone who has had access to the Schengen area within the last 14 days before their scheduled arrival in the United States, except for American citizens, U.S permanent residents and some categories of travellers. The travel ban, announced on Wednesday evening in the United States when Europeans were fast asleep, started causing shock waves even before the sun rose in Europe. Anger, chaos, and turmoil erupted in Europe – from company boardrooms, stock exchange floors, airports, and government offices as markets reacted to what is seen as an additional layer to the economic pain felt since the outbreak of COVID-19.

Italy and Denmark initiated complete country lockdowns as Europe becomes the new global epicentre of COVID-19. Italy is the most affected country in the region with a total of 17,770 cases and 1,255 deaths as Friday 13th March. Denmark which has reported more than 820 confirmed coronavirus cases, has initiated a complete lockdown, shutting borders with foreigners. As at Friday, France had reported 3,600 confirmed cases and 79 deaths while Germany had reported 3,634 confirmed infections and eight deaths.

Following an increase in infections in Europe, schools and universities have been closed and large gatherings banned as organizations including the European Commission initiated teleworking protocols. The situation has been experienced globally, as nations pledged to do all it takes to prevent the spread of the virus in their countries and save their economies.

Major events including professional football have been cancelled across Europe, including in France, Netherlands and Spain after some players tested positive for COVID-19. The Champions League was also postponed. In France, the Louvre, the world’s most visited museum is closed until further notice.

After initiating a ban on travels from Europe on Wednesday, the United States declared a national state of emergency over the coronavirus outbreak on Friday morning in the United States. Prior to the declaration of a state of emergency, cities across the U.S. including New York and Miami had already declared states of emergencies.

Coronavirus has also started spreading in more African countries. For the first time, COVID-19 infections were reported in Africa where Ethiopia, Ghana, Sudan, Guinea, Kenya and Mauritania. Other African countries with cases of the disease include Morocco, Tunisia, Egypt, Algeria, Senegal, Togo, Cameroon, Burkina Faso, the Democratic Republic of the Congo (DRC), South Africa, Nigeria, Ivory Coast, Gabon and Ghana. Most of the countries’ totals are still in single figures.

Most of Africa’s reported cases were foreigners or people who had travelled abroad, and many citizens in Africa are blaming their governments for allowing travels to and from infected countries. For example, Ethiopian Airlines has suffered criticism for its continued flights to China and other regions affected by the virus while Kenyan citizens erupted in uproar in late February when their government allowed a China Southern Airlines flight from China to land in February. Kenya has since suspended flights to and from China.

COVID-19 has not spared even global celebrities and first families. Canadian prime minister Justin Trudeau is governing remotely from home, in self-imposed quarantine after his wife tested positive following a visit to the UK while Jair Bolsonaro’s son denied local media reports that the Brazilian president had tested positive. The entire Romanian cabinet went into quarantine after coming into contact with a senator who has tested positive. Other celebrities include Tom Hanks who together with his wife tested positive for the virus after in Australia where Australian Home Affairs Minister Peter Dutton had also tested positive for the virus.

Interestingly, even bitcoin has not been spared by the rapidly spreading COVID-19. The price of the cryptocurrency has plummeted dramatically on Friday, losing 20 per cent of its value in less than an hour. The price crash took bitcoin below $6,000 – its lowest value since 2019. Some bitcoin analysts have blamed the COVID-19 outbreak. Simon Peters, a market analyst at online trading platform eToro, told The Independent that “Bitcoin has fallen as cryptocurrencies become caught up in the turmoil we’re seeing in traditional markets.” I for once thought that bitcoin and cryptocurrencies more generally were immune to crises like these if all the marketing hype used in marketing them is to go by. It appears they are not the safest haven their promoters claim they are.

In times of uncertainty like these, many investors might feel it is better to own cash or gold rather than more speculative cryptocurrencies like bitcoin and seem to be selling out to take back liquidity in case the coronavirus spreads even further.

*Stay safe from COVID-19 by implementing the WHO’s recommended safety procedures of washing your hands frequently and thoroughly with an alcohol-based hand rub or soap and water, maintaining social distancing, avoiding touching eyes, nose and mouth, practising respiratory hygiene (covering your mouth and nose with your bent elbow or tissue when you cough or sneeze) and see a doctor early if you have fever, cough and difficulty breathing, or when you suspect you have COVID-19.

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