The British Pound fell today against the US Dollar, leading to a drop below the 1.28 mark. After just barely breaking the 1.30 level over the past few days, it has now rapidly tumbled back down and passed the support level at 1.28, leading to a yearly low.
It seems that the GBP is the latest currency to face pressure against mounting fears of the coronavirus, as the number of cases in the UK have now risen to 40, mostly from infected individuals arriving in from Italy. While Britain seems to be largely spared from the increasing spread of the epidemic, the number of cases increasing in neighbouring European countries seems to have people preparing for the worst. The largest number of cases is still in Italy, with over 2000 infected and 52 deaths. This is a shocking increase of 20% infected from just the previous day.
The UK government is preparing for a worst case scenario as well, with health officials warning that the country can expect widespread infection fairly soon, with contact spreading expected to have already begun as well. When interviewed, UK Prime Minister Boris Johnson said that the country should prepare for “very significant expansion”, but also praised the National Health Service, saying that they were prepared and had the ability to conduct large scale virus testing.
20 schools across the country have shut down over coronavirus concerns, and now supermarkets are preparing for panic buying with additional stockpiles.
After seeing how the US stock market reacted to the coronavirus, with the Dow Jones dropping more than 1000 points in a single trading day, a loss of more than 10%, the Bank of England has promised to take action to prevent the same thing happening to the UK economy.
In tandem with other global stocks last week, the FTSE 100, or footsie also went down when a global sell-off caused markets to have their steepest falls since the 2008 recession.
Where one goes up, the other must come down. As discussed in last week’s article, gold hit unprecedented highs as investors flocked to the safe haven asset in droves. And now it seems US stocks have taken a plunge in response, as the Dow Jones dropped nearly 1000 points as it opened for the week, as part of a global stock selloff.
This marks the worst single day trading loss since October 2018 for the Dow Jones Industrial Average (DJIA) as it fell 950 points, a drop of 3.3%. Likewise, the NASDAQ dropped 3.8%, and the S&P 500 3.2%. All 3 are various measurements of stock performance in US companies and are three of the most commonly followed stock indices, being used to determine overall stock performance in the US market.
Around the rest of the world, things aren’t looking much better. Stock Indices in Europe and Asia experienced similar drops in percentage, with the UK FTSE 100, or footsie, dropping 3.3% as well and the German DAX down 4%.
This move comes as investors are scrambling to sell off stocks after the sudden increase in coronavirus cases across the globe and putting their money into safe haven assets instead. Iran, Italy and South Korea were the countries most affected, and fears of a global epidemic start to look like a real possibility.
Iran have reported 61 infections and 12 deaths, with neighbouring countries such as Turkey, Pakistan and Armenia closing their borders in response.
In Italy a 7th person has died, as 200 people have become infected. In a bid to contain the spread of the virus, the Italian government has shut down public buildings and limited transport in the affected regions.
In Korea, the number of cases jumped drastically from 100 to over 800, as it spread rapidly through a religious group known as the Shincheonji. South Korean president Moon Jae-in raised the country’s alert level to the highest possible, in an attempt to stay ahead of the virus as 7 people have died.
The World Health Organisation (WHO) are stressing that these new cases in Europe are especially alarming because there is no clear link between them and China, the origin of the virus. Despite strict travel restrictions the virus still seems to have spread, with WHO citing the new cases as “deeply concerning” and said that the world should be preparing for a “potential epidemic”.
Anish Lal at BlackBull Markets had this to say about the move in global stocks:
"Stocks plunged today as the number of Coronavirus cases and deaths have increased outside of China. The impacts were felt by way of a 3.5% fall in Euro Stocks and an almost 1,000 point fall in the Dow Jones. Major indices are now testing key support levels, with Gold feeling more safe haven love, as investors may look to target the $1,700 per oz mark. As this story develops, markets could continue to fall amid uncertainty, or we could see a short-term buy back, especially in the equities."