Dubai: After global investors saw $9 trillion in stock market wealth perish in the last ten days of trading, analysts could only see more volatility ahead, particularly as oil price prospects suddenly turned bleak.
“Uncertainty breeds greater market volatility,” wrote Keith Lerner, chief market strategist at SunTrust. “Much is still unknown about how severe and widespread the coronavirus will become.”
Analysts cautioned investors to brace for more of this volatility going forward with market swings having become the “new normal“. The swings continue to indicate how nervous investors have become about the unfolding outbreak, they added.
“From a market perspective, what we are seeing is uncomfortable but somewhat typical after shock periods,” Lerner added.
Panic spreads to oil
The crude oil market experienced its own crisis with major producers struggling to find common ground in order to mitigate the biggest downshift in global demand since the global financial crisis. The OPEC members now look to be preparing for a price war by announcing plans to actually increase output.
“Buckle up as oil prices will surely topple, but the question is by how much as the shock-and-awe Saudi strategy will propel oil markets into a period of radical uncertainty,” said Stephen Innes, chief market strategist at AxiCorp.
Recovery delayed further
The growing global outbreak are seen delivering shocks to supply and demand worldwide, with some industries expecting steep losses as the outbreak rages on. Global airlines stand to lose $113 billion in sales if the coronavirus continues to spread, according to the latest assessment from the International Air Transport Association.
U-shaped recovery has been pushed back to later in 2020 due to a harder hit to China’s economy in the first quarter, viral transmission outside China, and tighter financial conditions, according to economists at S&P Global Ratings, referring to a slower return to normal than the fast V-shaped recovery that some economists had hoped for last month.
Analysts also further warned of mounting expectations over the world’s most powerful central bank cutting interest rates again at its March 17-18 meeting, further adding insult to injury.