It cannot have escaped your notice that in the past two months the coronavirus has been the most closely followed development in the world. Needless to say, Covid-19 news coverage has also dominated the financial markets, as the pandemic will have far reaching and likely devastating effects on the global economy.
So, how have different assets taken the pandemic? Who are the winners and losers in the current crisis? Let’s find out.
Winners
The pandemic caused businesses to close down in order to respect social distancing rules, which in turn has sparked global recession fears. In this climate, investors favor safety assets as they seek to avoid risk as much as possible.
US Dollar
Arguably, the most reliable safe haven asset right now is the US dollar. The reserve currency pushed the euro down to a level last observed at the end of 2016, before allowing for a couple of price corrections. Similarly, the dollar also reached an 11-month maximum versus the Japanese yen, though the JPY has since recovered, as it is also a reliable safety asset. In March, the USD pushed the British pound to levels not seen since the financial crisis in 2009. The dollar also made headway against pretty much any other currency.
Right now, the USD has retreated from the highs reached earlier in March due to the extreme loosening of the Federal Reserve’s monetary policy. Government stimulus packages have also helped. Together, all measures taken in the United States have ensured better liquidity on the market, which has softened the dollar. However, at the first sign of trouble, the USD will begin appreciating once again.
Gold
Gold (XAU/USD) has also been another stellar performer during this trying time. Gold managed to reach levels close to $1,700, last seen in 2013. It also underwent a price correction in March, but even currently gold remains at multi-year highs, with a good perspective to grow further.
Losers
The following assets have been negatively affected by the virus.
Crude Oil
The coronavirus pandemic has had an almost paralysing effect on industry and travel, the two sectors responsible for most of the demand for oil. Instead of counteracting the drop of demand with deep production cuts, OPEC+ members started fighting amongst themselves, pumping more oil than they have since 2015. As a result, oil lost more than 50% of its value in March alone. From the range of $50-$55, it dropped to around $20-$25 per barrel, and may well go down further.
Oil companies have already revised down their profit projections for 2020, causing their stocks to go down in value.
Airlines and Plane Manufacturers
When the coronavirus first broke out in China, many companies stopped flying to and from China. As the pandemic spread around the world, the number of cancelled flights kept going. Airlines such as the United Kingdom’s Flybe have already gone bankrupt.
In the United States, an association representing the main carriers in the country has formally asked the government for a bailout worth at least $50 billion. More losses are expected in the sector as the quarantine continues around the world, preventing people from travelling.
Although aircraft manufacturer Boeing had problems even last year due to faulty planes, in 2020 its stock price dropped to levels last seen in 2013. Airbus, Boeing’s main competitor, also shed a substantial amount of its stock value in March, falling to its lowest level since December 2016.
Emerging Markets
The currencies of developing countries have been hit especially hard by the coronavirus pandemic. The US dollar reached a four-year maximum against the Russian ruble. The dollar also returned to highs versus the Turkish lira last observed in mid-2018. The Indian rupee also allowed the USD to climb to unprecedented levels.
Final Thoughts
The coronavirus pandemic is still far from over. It may take many months yet for it to end. Even after that, it will take months still for businesses to recover and for everything to go back to normal. Until then, safety assets will continue to reign supreme on the markets, while oil and emerging markets will stay vulnerable.
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