Company / Analytics

Analytics, 23 March 2020

Week 12 in Brief

Coronavirus pandemic still devastating the world. The week was dominated by the news of fast-spreading COVID-19 pandemic that has devasted cities and nations across the world. Over 341,000 people have so far been infected while the death toll is nearing 15,000 even as over 98,000 patients have recovered. The infection has so far reached all continents. Italy is the epicenter in Europe, New York is the epicenter of North America, South Africa is the epicenter of Africa while Brazil is the epicenter of Latin America. Though China remains the global epicenter, there were no new infections reported in China on Friday.

For the first time, humanity has been forced indoors with border, city and town lockdowns across the world. The usually teeming streets of Manhattan are quiet. In Italy, each city is a ghost city as life is under full lockdown.

In many countries, for example, in Italy, doctors have been forced to make extreme decisions. Due to limited resources, Italian authorities were quoted saying that “it may become necessary to establish an age limit for access to intensive care.”

Across the globe, religious ceremonies were either restricted or performed virtually. Saudi Arabia suspended prayers in holy mosques of Mecca and Medina while the Vatican has canceled public participation in Easters events. Church of England has restricted weddings to five people. The extreme measures initiated to control the COVID-19 across the world were inconceivable and will likely change people’s perspective on everything, on the world, on safety, and on governance. Governments have told them to expect more extreme measures.

Major sports events such as the premier leagues were canceled last week and there are calls to cancel upcoming global events. On Sunday, the International Olympic Committee (IOC) raised the possibility that the 2020 Summer Olympics could be postponed for a year due to the COVID-19 coronavirus pandemic and some countries such as Canada have indicated they will not send teams to the games. Researchers across the world are burning the midnight oil to find a vaccine for the COVID-19. The first human trial for the vaccine was performed in the United States this week while in UK researchers at Oxford University expect to conduct first animal tests early next month.

On the economic side, Goldman Sachs predicts the coronavirus crash will be bigger than it originally thought. The bank now projects a 24% drop in the U.S. GDP in the second quarter — a stark revision from its prediction of a 5% drop earlier this week. Some analysts maintain that saving that economy will require more than the tools used in the 2008 financial crisis as the epidemic could wipe out more than 3 million jobs in the US alone by June. As such, the crisis will require more than $1 trillion in spending to cover supply-chain shortages, health-care expenditures, and “the basic necessities for everyone who loses their job or income.” The Federal Reserve is already doing what it takes to save the economy.

At least four US senators are facing outrage for insider trading. Sens. Richard Burr, Kelly Loeffler, Dianne Feinstein, and James Inhofe are accused of insider trading after they offloaded large stock holdings after receiving closed-door coronavirus briefings on the COVID-19 but before its spread sent the stock market spiraling downward. Most of these senators are members of or have some links to the Senate Intelligence Committee.

Research shows current oil price collapse near record proportions. According to World Oil analysis of historical prices in constant dollars, “the oil price collapse of the last two weeks has reached the near-record territory. In fact, it appears that Saudi Arabia’s oil price war is backfiring as Riyadh and Moscow are now counting the cost and trying to adjust government spending as they expect sharp drops in oil revenues in the near term since Brent Crude is barely managing to cling to the $30 mark these days and the impact of the coronavirus pandemic on global oil demands. In fact, April could be the worst month ever for oil.

Stocks continued to tank this week in one of the most volatile weeks on Wall Street ever, as investors grappled with mounting fears over the coronavirus’ economic blow. The Dow Jones Industrial Average closed 913.21 points lower, or more than 4%, at 19,173.98 after rallying more than 400 points earlier in the day. S&P 500 slid 4.3% to 2,304.92. The Nasdaq Composite closed 3.8% lower at 6,879.52 after jumping more than 2%. The Dow Jones could be set for another week of underperformance as the massive coronavirus relief package faces an immediate roadblock.

This week?

We expect more Coronavirus Disease 2019 infections and extreme measures by governments to control it and drop in stocks and commodities performance despite efforts by governments to save their economies through stimulus packages. But life in Chinese cities is finally coming back to normal, so that presents some optimism that we will soon be over this pandemic and an indication that global supply chains could soon be back to normal. The smart, long-term investor knows very well it’s a good time to buy stocks.

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