The spread of the new type of corona virus is also shaking the stock markets more than previous crises. There are several reasons for this. Collapsing share prices, cut corporate forecasts and a whole host of economists who do not yet know exactly whether there will only be a drop in growth or a veritable global recession – the world of business, cardano prognose there has been no doubt for a few days, is firmly in its grip of the novel coronavirus called Sars-CoV-2.
Here are just a few highlights: After the price losses on the stock exchanges in the usa and Asia did not end on Thursday and Friday morning, the leading German index Dax collapsed by around 5 percent on Friday and fell below the 12, 000 point mark. Within a week, the index has lost more than 13 percent – the biggest minus in years.
In the days before, numerous corporations such as Apple and Microsoft had warned of the drastic effects of the corona outbreak on their business. Attempts by authorities and companies to contain the spread are paralyzing ever larger parts of economic life in China and Asia and beyond. Shops are closing, factories are shutting down production, supply chains are breaking down because borders are being closed or are becoming difficult to cross.
One consequence: Covid-19, as the disease caused by Sars-CoV-2 is officially called, will measurably reduce economic growth in 2020. The International Monetary Fund (IMF), for example, has already lowered its forecast for China’s growth in the current year from 6 to 5. 6 percent. According to the IMF, the global economy will not grow by 3. 3 percent in 2020 for the same reason, but only by 3. 2 percent.
However, this is based on the assumption that the People’s Republic can return to normality in the second quarter of this year. Will that happen? Completely unclear at the moment.
In Germany there are currently still comparatively few cases of Covid 19 diseases. Nevertheless, economists are already predicting corona-related growth losses for the local economy. Katharina Utermöhl, economist at the Allianz Group, even thinks that the German economy might shrink slightly in the first quarter. Overall, it will only increase by 0. 5 percent in 2020 due to Sars-CoV-2, according to Utermöhl.
Such forecasts do not exactly inspire confidence – and these are only rough estimates. Of course, nobody knows yet how the spread of Sars-CoV-2 will continue – and how much the economy and companies will really suffer from it in the end. It’s no wonder, then, that in the face of this large-scale uncertainty, investors are deciding to significantly de-risk and reduce their exposure to equities. After all, many of them are likely to have made considerable profits in view of the price increases in recent years, which must be brought to safety.
The problem: If corporations get into trouble like they are at the moment, they may no longer be able to service their debts. In this way, the misery threatens to spread from the real economy to the financial sector. In its report, the IMF highlighted companies in the usa and China in particular, whose indebtedness had risen sharply in recent years. According to the International Monetary Fund, even a downturn that is only half as severe as the 2008/2009 financial crisis would increase the volume of worldwide risky corporate loans to $19 trillion – that would be about 40 percent of all corporate loans.