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Similaire à Covid19 pandemic & the connectedness across financial market.pptx(20)


Covid19 pandemic & the connectedness across financial market.pptx

  1.  The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The virus was first identified in December 2019 in Wuhan, China.  WHO declared Covid-19 as global pandemic on march 11, 2020 after the three days of first case identified in Bangladesh.
  2.  Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives.  Financial markets facilitate the interaction between those who need capital with those who have capital to invest.
  3.  Covid-19 recession  2020 Stock Market Crash  Bond and debt markets  Collapse of Crude oil price  Russia-Saudi Arab Oil Price war  2021-2022 Global Supply chain crisis  2021-2022 Inflation Surge  Price gouging  2020-present global chip shortage
  4.  Financial risk and country risk  Panic buying  Business closures
  5. Cause •COVID-19 pandemic–induced market instability and lockdown Outcome •2020 stock market crash •Sharp rise in unemployment •Collapse of the tourism industry •Collapse of the hospitality industry •Collapse of the price of oil •Collapse of small businesses •Destabilization and collapse of the energy industry •Increase in government debt •Increase in economic inequality between rich and poor •Major downturn in consumer activity •Market liquidity crisis •Protests, riots and civil unrest •Trade Disruption & Shortages •Increased Inflation
  6. Movement of the Dow Jones Industrial Average (DJIA) between January 2017 and December 2020, showing the pre-crash high on 12 February, and the subsequent crash during the COVID-19 pandemic and recovery to new highs to close 2020. Date 20 February 2020 Type •Bear market •Stock market crash Cause •COVID-19 pandemic–induced market instability •Recession fears •Market liquidity crisis Outcome •Stock market instability •COVID-19 recession
  7.  On Monday, 24 February 2020, the Dow Jones Industrial Average and FTSE 100 dropped more than 3% as the coronavirus outbreak spread worsened substantially outside of China over the weekend. This follows benchmark indices falling sharply in continental Europe after steep declines across Asia.  On 27 February, due to mounting worries about the coronavirus outbreak, various U.S. stock market indices including the NASDAQ-100, the S&P 500 Index, and the Dow Jones Industrial Average posted their sharpest falls since 2008, with the Dow falling 1,191 points, its largest one-day drop since the 2008 financial crisis.  On the morning of 9 March, the S&P 500 fell 7% in four minutes after the exchange opened, triggering a circuit breaker for the first time since the financial crisis of 2007–08 and halting trading for 15 minutes. At the end of trading, stock markets worldwide saw massive declines (with the STOXX Europe 600 falling to more than 20% below its peak earlier in the year), with the Dow Jones Industrial Average eclipsing the previous one-day decline record on 27 February by falling 2,014 points (or 7.8%).The yield on 10-year and 30-year U.S. Treasury securities hit new record lows, with the 30-year securities falling below 1% for the first time in history
  8.  Prior to the coronavirus pandemic, a massive amount of borrowing by firms with ratings just above "junk", coupled with the growth of leveraged loans, which are made to companies with significant amount of debt, created a vulnerability in the financial system. The collapse of this corporate debt bubble would potentially endanger the solvency of firms, potentially worsening the next recession  During the 2020 stock market crash that began the week of 9 March, bond prices unexpectedly moved in the same direction as stock prices. Bonds are generally considered safer than stocks, so confident investors will sell bonds to buy stocks and cautious investors will sell stocks to buy bonds. Along with the unexpected movement of bonds in concert with stocks, bond desks reported that it had become difficult to trade many different types of bonds, including municipal bonds, corporate bonds, and even U.S. Treasury bonds
  9.  The COVID-19 pandemic and related confinement measures caused an unprecedented contraction in economic activity and a collapse in demand for oil and oil products. The result is one of the biggest price shocks the energy market experienced since the first oil shock of 1973.  Oil prices dipped below US$20 (Brent Crude) a barrel, losing nearly 70% in value, with storage capacity approaching its limits (Oil Price).  The reduction in the demand for travel and the lack of factory activity due to the outbreak significantly impacted demand for oil, causing its price to fall. In mid-February, the International Energy Agency forecasted that oil demand growth in 2020 would be the smallest since 2011
  10. Movement of WTI price from 2019. The crash started in mid-February 2020. On 20 April 2020, prices dropped below zero for the first time in history
  11.  On 8 March 2020, Saudi Arabia initiated a price war on oil with Russia, facilitating a 65% quarterly fall in the price of oil. In the first few weeks of March, US oil prices fell by 34%, crude oil fell by 26%, and Brent oil fell by 24%.The price war was triggered by a break-up in dialogue between the Organization of the Petroleum Exporting Countries (OPEC) and Russia over proposed oil-production cuts in the midst of the COVID-19 pandemic. Russia walked out of the agreement, leading to the fall of the OPEC+ alliance. Oil prices had already fallen 30% since the start of the year due to a drop in demand.The price war is one of the major causes and effects of the ensuing global stock-market crash.  In early April 2020 and again in June 2020, Saudi Arabia and Russia agreed to oil production cuts. The price of oil became negative on 20 April. Oil production can be slowed, but not stopped completely, and even the lowest possible production level resulted in greater supply than demand; those holding oil futures became willing to pay to offload contracts for oil they expected to be unable to store
  12.  In 2021, as a consequence of the COVID-19 pandemic, global supply chains and shipments slowed, causing worldwide shortages and affecting consumer patterns. Causes of the economic slowdown include workers becoming sick with COVID-19 as well as mandates and restrictions affecting the availability of staff. In cargo shipping goods remain at port - again due to staffing shortages.  The related global chip shortage has continued to affect the supply chain crisis specifically as it relates to the automobile and electronics sector. During the Christmas and holiday season of 2021, an increased amount of economic spending in North America combined with the spread of the Omicron variant of COVID-19 further exacerbated the already backed up supply.
  13.  The 2021–2022 inflation surge is the higher-than- average economic inflation throughout much of the world that began in early 2021. It has been attributed to the 2021 global supply chain crisis caused by the COVID-19 pandemic, and unexpected demands for certain goods. As a result, many countries have seen their highest rates of inflation in decades.
  14.  Price gouging occurs when a seller increases the prices of goods, services, or commodities to a level much higher than is considered reasonable or fair. Usually, this event occurs after a demand or supply shock.  Price gouging became highly prevalent in news media in the wake of the COVID-19 pandemic, when state price gouging regulations went into effect due to the national emergency. The rise in public discourse was associated with increased shortages related to the COVID-19 pandemic.
  15.  The 2020–present global chip shortage is a ongoing global crisis in which the demand for integrated circuits (commonly known as semiconductor chips) exceeds the supply, affecting more than 169 industries.  The crisis has led to major price increases, shortages queues and scalping among consumers for automobiles, graphics cards, video game consoles, computers, and other products that require semiconductors.  Commonly cited causes for the shortage include the COVID-19 pandemic, the China–United States trade war, and various severe weather incidents.
  16.  As coronavirus put Europe and the United States in virtual lockdown, financial economists, credit rating and country risk experts have scrambled to rearrange their assessments in light of the unprecedented geo-economic challenges posed by the crisis. M. Nicolas Firzli, a director of the World Pensions Council (WPC) and advisory board member at the World Bank Global Infrastructure Facility, refers to it as "the greater financial crisis", and says it is bringing to the surface many pent-up financial and geopolitical dysfunctions.  The OECD points out that businesses in many countries have become highly indebted, while the very low cost of borrowing and accommodative monetary policy has contributed to unprecedented corporate debt issuance.  Consequently, the corporate debt stands at very high levels in many G20 countries. Also, lower-rated credit issued in the form of BBB bonds, non-investment grade bonds, and leveraged loans has risen to elevated levels, the OECD warns, meaning businesses will have little choice but to reduce costs and employment to withstand insolvency pressures.
  17.  Panic buying (alternatively hyphenated as panic-buying; also known as panic purchasing) occurs when consumers buy unusually large amounts of a product in anticipation of, or after, a disaster or perceived disaster, or in anticipation of a large price increase or shortage.  Panic buying became a major international phenomenon in February and March 2020 during the early onset of the COVID-19 pandemic, and continued in smaller, more localized waves throughout during sporadic lockdowns across the world. Stores around the world were depleted of items such as face masks, food, bottled water, milk, toilet paper, hand sanitizer, rubbing alcohol, antibacterial wipes and painkillers. As a result, many retailers rationed the sale of these items. Online retailers eBay and Amazon began to pull certain items listed for sale by third parties such as toilet paper, face masks, pasta, canned vegetables, hand sanitizer and antibacterial wipes over price gouging concerns. As a result, Amazon restricted the sale of these items and others (such as thermometers and ventilators) to healthcare professionals and government agencies
  18.  By April, departmental store retailers JCPenney, Nordstrom, Macy's and Kohl's had lost $12.3 billion combined in market caps. Neiman Marcus and JCPenney defaulted on bond payments in April, preparing internally for bankruptcy court and bankruptcy protection. J.Crew and Neiman Marcus filed for bankruptcy during the first week of May; they were reportedly the first two major retailers to do so during the pandemic. JCPenney filed for bankruptcy on 15 May.
  19.  The global covid-19 pandemic has impacted e-commerce in a good aspect. As humans have embraced social distancing as a manner to gradual the unfold of the pandemic, there has certainly been a drop-off in brick-and-mortar shopping.  E-commerce had been steady gaining momentum. E- commerce has surpassed levels not expected until 2025 due to the covid-19 pandemic, expected to bring in over $843 billion in sales this year.  Social media plays a huge role, Facebook and own e- commerce web sites of e-commerce firms are the foremost growing sales channels since the start of the covid-19 crisis.  As Ecommerce announced, retail sales of e-commerce shows that covid-19 has a significant impact on e- commerce and its sales are expected to reach $6.5 trillion by 2023