Global Recession is Here as Coronavirus Pandemic Escalates: S&P Global Warns
The global economy is forecast to fall into a recession this year, as governments around the world take severe steps to restrict the movement of people with the aim of mitigating the spread of the coronavirus, global rating agency Standard & Poor’s said in a report today.
The draconian restrictions on person-to-person contact in Europe and the U.S. have sent markets nosediving as risk-aversion increases and views on economic activity, earnings, and credit quality deteriorate sharply, S&P economists said. As a result, the economists now forecast a global recession this year, with annual GDP rising 1%-1.5%, and risks remaining firmly on the downside.
With the coronavirus, known as COVID-19, now present in more than 70 countries, and many cities closing schools, restaurants, businesses, and borders, global financial markets have been hit hard.
U.S. markets saw a volatile start of the week with Monday marking the worst trading day in more than 30 years as the Dow Jones Industrial Average (DIA) suffered a 3,000-point loss amid fears that the coronavirus pandemic may last longer than expected in the U.S. The S&P 500 index fell 324.89 points, or 12%, closing at 2,386.13, and the Nasdaq Composite Index (NDAQ) shed 970.28 points, or 12.3%, to finish at 6,904.59. The majority of Wall Street analysts rate Nasdaq with a moderate buy and an average price target of $117.20, representing an upside of 31%.
Financial markets have gone into freefall, and volatility has spiked to levels last seen during the global financial crisis as the stock markets began to price in the consequences of COVID-19 on growth, earnings, and credit. Day-to-day fluctuations sent the closely watched VIX measure of volatility to its highest level since the global financial crisis, the S&P stated. Moreover, credit spreads were their widest in more than a decade, and that wasn't limited to speculative grade, it said.
