Things are not getting worse for the world economy. The stock market suffered a new setback, generating a “black Wednesday”, caused by fear of the Coronavirus. The pandemic has not only affected the economies of the main countries, but the cryptocurrency market.
From Monday to Black Wednesday
What happened this Monday, March 9, will be fixed in world economic history. Since, the collapse suffered by the financial markets would have its ultimate cause in the advancement of a disease: the Coronavirus.
The impact of the virus is not only counted in the number of infected and fatalities, but also in the millions of dollars it has made the world economy lose.
Thus, as the disease enters more and more countries, they are forced to declare a national emergency in their territories. This avoids the normal development of the citizenry, to avoid that the levels of contagion increase. What ends up negatively impacting the world economy.
And, by preventing people from getting to work and generating wealth as usual, in a world as globalized and interconnected as ours, global supply chains are also being disrupted.
Well, at the end of the day, the goods produced in countries like China end up being pieces of a much bigger industrial gear in other countries. These markets are left with no alternative to supply in the event of Chinese production disappearing.
All this had its first indication in the oil market. Since, a decrease in international economic activity results in a reduction in demand and, therefore, in the price of a barrel of oil. What as a consequence of not needing as much energy as before to maintain a reduced market economy.
This led the main oil-producing countries of the world, the members of OPEC and Russia, to try to reach an agreement to decrease global production, and thus avoid an abrupt drop in the price of a barrel.
But, given the inability of Russia and Saudi Arabia to reach an understanding, a price war broke out between the two countries, which has cost the oil barrel 30% of its value so far.
With this scenario in the offing, we cannot be surprised by the sharp decline in the international financial market. Represented by the collapse of all the main stock markets in the world this Monday.
The stock markets reacted, first of all, to the price war between the Saudis and the Russians. However, Coronavirus is listed as the underlying cause of all these movements.
Fall is a reality
As if that were not enough, the main stock markets in the world have collapsed again this “Black Wednesday”. The reason is the low confidence of the markets due to the measures taken by governments to reduce the impact of the Coronavirus.
And, today, the unfortunate expansion of this disease seems inevitable. With Italy, the western nation most affected so far, having practically quarantined the entire country. While its neighboring countries, France, Spain and the United Kingdom, consider increasingly extreme measures to contain the crisis. Auguring further economic paralysis in the short term.
This is what the financial markets have perceived, which have fallen dramatically again. Only the New York Stock Exchange lost up to 5% of its value during this session when its main indexes collapsed: S&P 500 (4.89%), Dow Jones (5.86%) and Nasdaq (4.70%) .
Although this fall in the international financial market this “Black Wednesday” is explainable in light of the advance of the Coronavirus, the collapse of the crypto market and the gold market is not so easy to understand.
Contrary to what traditional economic logic might tell us, these value reserves, instead of increasing their price amid the crisis of confidence triggered by the disease, have decreased it.
The most dramatic case among these assets would be Bitcoin, which fell from $ 7,950 per BTC to $ 7,624, just beginning to recover little by little, reaching $ 7,810 at the time of writing this article.
A path similar to that followed by gold, which decreased slightly in value throughout the day. He started to recover only at the end of the day, once the New York Stock Exchange closed.
In this way, the magnitude of the economic crisis caused by the Coronavirus worldwide is evident. Having consequences not only in the health of the people it affects, which is already serious enough, but in the entire world economy.
The virus has limited the activities that allow our modern world to continue to function. And it has even altered the patterns of behavior common in markets such as cryptocurrencies.