How sensitive are stock markets to epidemics?

  •   11/02/2020 - 10h22
  •   DEHOUI Lionel

The speed of propagation, their lifespan, their degree of dangerousness, or the effectiveness of their vaccine are all medical parameters that set the pace for the announcement of epidemics. All that is required is a change in these medical parameters and an assessment of their economic impact is automatically made. All the bases of stock market reactions have been shaken.

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How sensitive are stock markets to epidemics?

The influence of epidemics on the stock market

Today's stock market news focuses more on epidemics caused by Ebola, SARS, ZIKA, MERS and especially Coronavirus (2019-nCov). For the assessment, the size of GDP is taken into account in order to see the international impact in the immediate future. As of January 23rd, the world saw a huge drop of -10.7% in Shanghai before falling even more on February 3rd, -4.1% in Germany for the DAX and CAC40 and -3.8% for the Dow Jones as of January 31st.

Indeed, the first stock market consequences of the coronavirus epidemic were felt on the secondchina is the world's second largest GDP (after the USA, which is at the top with 20,500 billion dollars), weighing in at 13,600 billion dollars. Analysts estimate that Chinese growth would be down 6 or 5% in the new year 2020. The losses would therefore be close to the famous $150 million barrier. This is how the Chinese economy has been going since the advent of Coronavirus. But what about the American stock markets?

 

America stands firm with other countries of the world

The crisis is international and the countries working with China are suffering cruelly as a result. Buying countries, exporting countries or intermediate countries in China's finished product trade are all impacted. Because they are all down in the stock market due to their relative GDPs. Prior to the announcement of the existence of an antidote, the price of oil dropped considerably automatically. On February 3, Brent's barrel of crude oil reached $54 a barrel, the normal extension of its decline that began on January 23. The evolution of the coronavirus makes it more contagious than SARS even though it is less dangerous. China's virus containment measures are therefore welcome.

On the other hand, the United States is still growing, companies are still making considerable profits and the unemployed are not yet out of work. The Fed will lower rates if necessary. In a word, America has returned to its former peak while remaining calm.

In Europe, France and Italy remain concerned about the Chinese situation, as the social climate in France is more favourable to influences from China and Brexit. All eyes are fixed on China, which has reached its lowest level despite the unwavering support of the central bank. Regardless of the reasons for this crisis, prices as well as growth will be impacted. There is economic resurgence at all levels globally, although Chinese stock exchanges will remain under scrutiny.