The global financial markets suffered a terrible fall back because of the coronavirus pandemic. Stocks crashed, several companies lost a lot of money, and had to fire a large percentage of staff. While the pandemic is still raging in many countries, these places are seeing some respite. Many countries have seen some improvement and have begun to ease lockdown. However, the second wave of coronavirus cases has caused a fall in many European stocks.
According to a recent Reuters report, the coronavirus rate on Friday was 1.06. By Sunday, June 21, this rate increased to 2.88, more than a 100% rise. In response, European stocks fell at least 0.3% at the market’s opening. The rise is tied to an increase in the number of cases of workers in several meat processing factories around the country. There is now a general fear that this increase will bring about harsher restrictions to curb the spread.
Coronavirus Pulls Down European Stocks
The Stoxx Europe 600, which climbed 3.2% last week, has lost 0.36%, with similar losses seen with other indexes. Also, the French CAC, German DAX, and the UK’s FTSE 100 all recorded losses.
Describing the situation, XM investment analyst, Marios Hadjikyriacos, suggests that the coronavirus situation will continue to affect European stocks and others, for a while:
“Emotions are the name of the game, and those can swing wildly and quickly. In a few short weeks we’ve gone from caution, to panic, to skepticism, to greed, to euphoria, and now we seem to have come back to the caution stage.”
Airline stocks have been some of the hardest hit. In most places, flights are yet to resume, and those who currently fly are running skeletal trips. However, Deutsche Lufthansa AG (ETR: LHA) now has much more to grapple with as it has lost 6%. The loss is in response to its major shareholder, Heinz Hermann Thiele, struggling with a bailout relief.
U.S. Stocks Tell a Different Story
As European figures are reducing, those in the U.S. generally look better. The U.S. is also grappling with a rise in coronavirus cases, causing Apple Inc (NASDAQ: AAPL) to announce a temporary shutdown of 11 stores across the country. However, the emotions in the U.S. are a lot more optimistic.
For example, futures on the S&P 500 pointed to an increase of 0.7% regardless of the rise in COVID-19 cases. The price of Gold also increased. While U.S. figures don’t exactly call for celebration, the outlook is better than that of European stocks.
The credit rating agency Moody’s has however predicted a grim future for the government. Many countries have struggled through the pandemic by floating several bailout measures to help the economy. These measures, however necessary they may have been, might eventually be problematic, causing serious debts. Moody’s wrote:
“Government debt/GDP ratios will rise by around 19 percentage points, nearly twice as much as in 2009 during the GFC … the rise in debt burdens will be more immediate and pervasive, reflecting the acuteness and breadth of the shock posed by the coronavirus.”
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