Market Spice: Week of February 24th, 2020

Market Spice: Week of February 24th, 2020 

By Max Dowden and Delany Higgins 

Global markets suffered dramatically over the course of the week as traders assessed the potential economic damage caused by the COVID-19 outbreak. On Thursday, a spokesperson from the International Monetary Fund warned that it was likely to downgrade its forecasts for global growth. The IMF noted that the impact from decreased activity in China would have a particularly strong impact. In the U.S., despite hitting record highs the previous week, the S&P 500 suffered its fastest 10% decline on record. 


  • Japanese PM Shinzo Abe announced the closure of schools across the country, as well as many businesses, in efforts to contain the COVID-19 outbreak. Despite this slowdown, the yen, a traditional safe haven currency, gained slightly against the dollar. The Nikkei 225 declined 9.6% over the course of the week. 
  • On Saturday, China’s National Bureau of Statistics announced that the manufacturing Purchasing Managers’ Index had fallen to 35.7 in February, down from 50 in January. This marks an all-time low, worse than 2008. The government is simultaneously working to contain the outbreak, and to restart business. The NBS announced that nearly 80% of businesses had resumed activity, but many businesses that rely on migrant labour are still struggling with travel restrictions. To prop up smaller and medium-sized enterprises, the government has announced a series of tax cuts, as part of its wide-ranging policy response. Over the course of the week, the CSI 300 dropped 4.7% and the Shanghai Composite dropped 5.0%. 
  • Malaysia, South Korea, and Hong Kong, among others, announced stimulus measures to counter the effects of the COVID-19 outbreak, with Hong Kong giving each of its adult residents hit by the virus HK$10,000 (£1,000).   
Image Source: REUTERS/Flavio Lo Scalzo


  • Europe saw the largest stock market drop since 2008, with most major indexes dropping around 10% over the course of the week. The STOXX 600 dropped 10.3%, the FTSE dropped 9.3%, and the DAX dropped 9.4%.  
  • The largest European breakout centred in Italy, causing the quarantine of eleven northern towns. Much of the affected region is key to Italian manufacturing, and life in Milan, Italy’s financial centre, has been forced to slow dramatically. 
  • European Central Bank President Christine Lagarde told the Financial Times that the outbreak seemed unlikely to cause serious inflation, and that the ECB was therefore unlikely to respond via monetary policy. 
Image Source: Sarah Silbiger/Getty Images

North America 

  • The VIX, known as the ‘fear index’ of the U.S. market, hit its highest level in nearly a decade. The VIX measures market volatility, and neared 50 on Friday, the highest since 2011.  
  • In the U.S., the three major indexes each fell over 10% from their peaks of the previous week. Deutsche Bank Global Research concluded that the S&P 500’s correction marks the fastest in history, with energy stocks hit the worst. The Wall Street Journal reported that U.S. stock trading volumes hit an all-time high. 
  • On Tuesday, U.S. Center for Disease Control Director Dr. Nancy Messonier noted that the CDC believed the question was no longer if, but rather ‘when and how’ the COVID-19 outbreak would reach the country. 
  • US Federal Reserve chair Jerome Powell stated on Friday that the Fed would ‘act as appropriate’ to support the economy, raising hopes of a rate cut in the near future. The fed funds futures markets assesses a 100% chance of a rate cut by the Federal Reserve’s upcoming March meeting. U.S. 10-year Treasury notes hit a low of 1.114 on Friday.    

Other Markets

  • Brazil announced its first COVID-19 case on Wednesday. The Bovespa dropped 9.4% over the week, in tune with global markets, and the real hit all-time lows relative to dollar 

The views expressed in this article are the authors’ own, and may not reflect the opinions of The St Andrews Economist.

Cover Image Source: Yahoo, Chinatopix via AP

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