Markets were battered again this week, as the economic impact of a still spreading coronavirus combined with a staggering decision from Saudi Arabia to increase oil production.
The coronavirus situation has gone from bad to worse globally, with all of Italy effectively in lockdown, whilst other countries in Europe step up containment measures.
Whilst the total numbers of cases in Australia remains modest, it continues to spread by the day, with some schools, nursing homes and childcare centres closed in an effort to limit its spread.
It’s impact on the psyche of Australian consumers has already been profound, with the latest consumer confidence figures falling 4% last week, with people’s assessment of economic conditions falling nearly 25% in the last two weeks. These declines are akin to the declines seen at the height of the global financial crisis just over ten years ago.
The spread of coronavirus alone was causing no end of distress to financial markets, but with the oil price crash (which could lead to a lot of defaults amongst highly leveraged energy producers) it seems investors just gave up on Monday, with the following headline from the Wall Street Journal summing up the global mood.
Australian markets have felt the full force of the sell-off, with the ASX 200 down by almost 20%, not only wiping out this year’s gains, but all of the capital appreciation seen in 2019 as well, when stock market bulls were celebrating new highs.