Coronavirus market impact

As the reaction to coronavirus continues to cause dramatic market movements, traders are choosing IG because we have been delivering a world-class trading experience for over 45 years1.

Follow the impact the virus is having on finanial markets here, and discover how we can help you navigate volatility.

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How is the coronavirus impacting financial markets?

The coronavirus outbreak has caused far-reaching social and economic disruption, and markets are reeling as a result.

Economies around the globe could suffer big hits to GDP growth, as increasing lockdown measures alter supply and demand – with millions of people off work, schools shutting and thousands of restaurants and other businesses closed. Global financial markets are experiencing extreme volatility as a result, as investors grapple with the multitude of effects the virus could have.

To highlight the impact that coronavirus is having on global markets, we’ve taken a look at the way the S&P 500 – a common benchmark for global economic health – has reacted compared to other market crashes.

  • The first chart to the right shows that the initial few days of coronavirus volatility had a much more rapid impact than the other crashes
  • The second chart indicates that the effects of coronavirus are likely to be in their infancy
  • From the final chart, we can see that it has taken the stock market varying periods of time to recover from each crash – so we could see the effects of coronavirus last up to a year or much longer

Read more on the markets’ reaction to coronavirus, or take a look at our latest news and trade ideas.

Comparing the impact of coronavirus and historical crashes on the S&P 500

  • Initial impact
  • What happened next
  • Recovery

Day zero on the chart is the final high of the S&P 500 at market close, before the bear market began.
Data is accurate as of 24 April 2020

Day zero on the chart is the final high of the S&P 500 at market close, before the bear market began.
Data is accurate as of 24 April 2020

Day zero on the chart is the final high of the S&P 500 at market close, before the bear market began.
Data is accurate as of 24 April 2020

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Coronavirus and market volatility

  • What's happening now
  • What could be to come
  • What's happened already

The table below shows the prices for some of the financial markets that have been impacted by coronavirus volatility.

Sell
Buy
Change
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Prices above are subject to our website terms and conditions. Prices are indicative only.

Open an account today to react to news, or practise trading in a demo account.

Although there is no way to know for sure what the lasting effects of Covid-19 could be on financial markets, we have seen a clear trajectory for other European nations and US as their cases rise without any lockdown.

While the economic measures to support businesses and individuals throughout this crisis may lessen the impact, it could only be a matter of time before there are further lockdowns in other nations. This could have a huge impact on travel, tourism and consumption.

In this environment, assets focused on global growth will be out of favour. This means equities, most commodities and high-yield bonds. Capital preservation and safe yields are the key here, so the dollar and government bonds will be high in demand, while safer equities - such as utilities - come into their own.

At times like this, markets tend to trade on herd sentiment and news flow. With that in mind, it's important to keep an eye on the latest news and ensure you have a suitable risk management strategy in place.

Take a look at IG analyst Josh Mahony’s summaries of recent market activity below.

Stocks

While coronavirus volatility started in mid-February, it came to a head on what is being called the new ‘Black Monday’ – 9 March 2020. The day saw oil prices fall and global stock markets collapse in one of the largest single-day declines since the financial crisis of 2007-2009.

Travel firms have been at the sharp end of the sell-off, as lockdowns and quarantining have caused a slump in demand for flights, cruises and hotel rooms. Oil stocks have also suffered – hit by lower demand for travel and the oil price war between Russia and Saudi Arabia.

Indices

Stock indices have experienced significant price fluctuations in response to the ongoing situation. On Black Monday, US indices hit the limit down of 7%, causing the NYSE to halt trading. The automatic stabilisers were brought back into effect on Tuesday, with a limit up scenario, but Thursday saw a limit down again. This huge volatility is likely to be here to stay as the economic fallout of this global pandemic plays out.

Commodities

Gold has not been the hedge many thought it would be, falling as investors sell their holdings to buy the dollar, and dropping further as markets worry that inflation will be weak for months to come.

The oil price war also saw record increases in the amount of oil supplied, just as demand looks set to decrease – ensuring crude prices remain volatile.

Forex

The Federal Reserve quickly closed the gap in interest rates on the rest of the global world, sparking huge declines for the dollar. While the flight to safe-haven assets caused the Japanese yen to soar into multi-year highs. However, the Bank of Japan is standing by with tools to use in a bid to stem the flow of money into the yen.

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1 Based on revenue excluding FX (published half-yearly financial statements, June 2019)

224/7 means all week apart from ten hours from 10pm Friday to 8am Saturday (UK time), and 20 minutes just before the market opens on Sunday.

3A small premium is payable if a guaranteed stop is triggered.

4 As awarded at the Investors Chronicle and Financial Times Investment and Wealth Management Awards 2018, and the Professional Trader Awards 2019.