Coronavirus market impact

As the reaction to coronavirus continues to cause dramatic market volatility, traders choose us because we've been delivering a world-class trading experience for over 45 years.1 Follow the impact the disease is having on financial 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 22 June 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 22 June 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 22 June 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 live prices for some of the financial markets that have been impacted by coronavirus volatility.

Sell
Buy
Change
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Although there's no way to know for sure what the lasting effects of Covid-19 could be on financial markets, discussions have become increasingly forward-thinking as countries begin to discuss the easing of lockdown measures and a potential second wave of infection.

While the economic measures to support businesses and individuals throughout this crisis may lessen the impact, the 'new normal' of social distancing will inevitably have a significant effect on travel, tourism and consumption.

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's being called the nw 'Black Monday' - 9 March 2020. The day saw global stock markets collapse in one of the largest single-day declines since the finanacial crisis of 2007- 2009.

Travel firms were at the sharp end of the sell-off qnd have continued to see volatility as lockdowns have caused a standstill.

Throughout earnings season, the focus will likely be less on profits and more on which companies could survive the economic downturn. The sharp decline in the stock market has meant that estimates remain low, but that manay companies could be set to beat the forecasts.

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 have been triggered numerous times as the economic fallout of this global pandemic plays out.

In the UK, the FTSE 100 fell to an eight and a half year low following the news that the country would go into lockdown.

Commodities

Oil markets have seen significant volatility casused by lower demand. Oversupply continues despote OPEC + cuts, which has caused a lack of global storage capacity.

On Monday 20 April, traders were faced with the prospect of being forced to take physical delivery of oil, leading to large numbers of speculators dumping their futures contracts at whatever the cost. This caused the price of oil to fall into negative numbers for the first time ever.

It remains to be seen how the market will respond to production cuts and lockdown easing in the UK and US. But we will likely see a lasting impact on oil market liquidity, as traders move away from contracts with upcoming expiry dates, which could lead to greater volatility.

Forex

The US dollar's 'haven' status has continued to see the currency of fiscal stimulus we're seeing, rather than the devaluation associated with huge growth on the Fed balance sheet.

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1 Based on revenue excluding FX (published half-yearly financial statements, June 2019); for forex based on number of primary relationships with FX traders (Investment Trends UK Leveraged Trading Report released July 2019).

224/7 excludes the hours from 11pm Fri to 9am Sat, and 20 mins just before the weekday market opens on Sunday night.

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.

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