Markets tumble but prove 'resilient' amid virus fears: BIS
02 March, 2020
Markets worldwide have observed dramatic drops in the last week amid coronavirus fears, but thanks to reforms following global financial meltdown, they are proving "resilient", the lender of International Settlements' chief economist said on Sunday (Mar 1).
Presenting a quarterly overview of the Basel-based BIS, considered the central bank for central banks, head of the monetary and economical department Claudio Borio acknowledged that "markets had a rude awakening last week".
He pointed out that after an "initial, short-lived shock" last month, when the COVID-19 epidemic was exploding in China, "market participants had taken a fairly benign view of the impact of the coronavirus on the global economy".
But all that changed the other day as the global spread of the virus found, sending stock markets plunging with their lowest levels since the 2008 global financial crisis over fears that the condition could wreak havoc on the world economy.
The virus has now killed practically 3,000 people and infected over 87,000 worldwide, with a growing number of new cases being reported every day.
"Acute concerns and uncertainty gripped market participants, as the expectation of an instant V-shaped recovery now appeared grossly unrealistic," Borio said.
He pointed especially to markets in risk assets, which "plunged as if no bottom was in sight: no one really wants to catch a falling knife."
Leading European stock markets lost a lot more than 10 per cent in just seven days, while Wall Street fell 12 %.
Crude oil prices tumbled as well and analysts said central banks, especially the united states Federal Reserve, might have to shift into crisis-resolution mode with urgent interest rate cuts.
But regardless of the sharp drops and widespread "turmoil and anxiety", Borio stressed that "both market functioning and financial intermediation more generally proved resilient."
"The post-crisis regulatory reforms targeted at strengthening finance institutions are bearing fruit," he said.
But Borio acknowledged that "uncertainty rules globally (and) the situation remains fluid."
"One thing is for certain," he said. "Financial markets will continue to dance to the tune of news about the virus and of the authorities' response."
Source: www.channelnewsasia.com