With millions of people of people forced to stay home around the world, mental depression has a good chance of sneaking its way into the global psyche. But is an economic depression on the way? Analysts have started to bounce around the D-word following dramatic declines on Wall Street and concerns that the COVID-19 virus will take months to be contained, bringing global business to a near standstill.
Stocks plummeted on Monday and the Dow Jones Industrial Average saw its worst day since 1987, closing down 12.9 percent. The index dropped more than 3,000 points during Monday's trading session before gaining slightly for the close of the day. The Nasdaq Composite lost 12.3 percent on the day, the index's worst day in history. The S&P 500 closed down 11.98 percent.
Reuters analysts pointed out that the S&P 500 fell an average of 28 percent from peak to trough during recessions in the past 70 years, but that the index is now down 29.5 percent since its February 19 record close. Still, in the 2008 financial crisis, the index fell more than 50 percent, leaving traders and analysts concerned that it still has more to fall before the bottom is hit.
Are New Policies Working?
These days it seems that policymakers are implementing new policies faster than ever; on a political level, decisions have been taken to restrict travel, gatherings, school, and other events on a day to day basis.On an economic level, global central banks have taken quick decisions about interest rate cuts and stimulus policies. Nevertheless, there remains a global panic. What if these steps are not enough? Worse, health professionals are cautioning that the coronavirus pandemic can last for several more months, perhaps through the summer, which would have a prolonged economic impact that hasn't yet been priced into the market. Analysts remain concern that central banks have already used the most potent tools in their arsenals, leaving little left to stimulate the economy in the future, when more measures will likely be necessary.
The dollar remained the strongest currency during Tuesday's Asian trading session, with the greenback surging 0.74 percent against the yen to trade at 106.63. The greenback also gained against its other primary trading partners. The pound slid 0.342 percent against the dollar to trade at $1.222 as of 3:01 p.m. HK/SIN. The euro eased 0.25 against the greenback to $1.115.