Market Spice: It was the Best of Days, it was the Worst of Days

By Delany Higgins 

Market Spice: Week of March 9th, 2020 

It was the best of days, it was the worst of days. On Wednesday, the World Health Organisation officially declared COVID-19 a pandemic.  Markets recorded both record losses and record gains as the U.S. confronted the outbreak, with the S&P 500 dropping 8.8% overall for the week. The Dow closed Friday up 9.4% following President Trump’s declaration of a national emergency and House Speaker Nancy Pelosi’s indication that a stimulus agreement was near. Governments across the globe moved to cut interest rates or enact other stimulus measures. 

Image Source: Str/Afp Via Getty Images


  • Although China is now believed by some to be in a recovery phase from COVID-19, the People’s Bank of China cut the bank’s required reserve ratio, releasing $79 billion to the economy.  Industries previously locked down, such as services and construction, have begun to start up again. 
  • In a relatively modest drop compared with other indexes, the Shanghai Composite Index fell 4.8%. 
  • Japan’s Finance Ministry released data indicating that Japanese investors, aided by a strengthening yen, purchased $41 billion in overseas debt in the previous week. The Nikkei 225 dropped 16%, down 26.3% over the past twelve months. 
Image Source: Reuters via FT


  • The European Central Bank approved a stimulus program but did not cut interest rates. The program includes bank loans and more favourable rates on previously agreed liquidity arrangements. On Friday, European Commission President Ursula von der Leyen announced a €37 billion investment initiative, following a Tuesday announcement of €25 billion of spending. 
  • On Wednesday, the Bank of England cut interest rates to 0.25% and announced a £30 billion spending addition to the annual budget. Chancellor Rishi Sunak announced property tax relief for businesses, extended sick pay, and increased National Health Service funding. The London Stock exchange eased requirements on exchange-traded-fund activity. 
  • Germany announced  increased state investment in infrastructure in the coming years. Finance Minister Olaf Scholz declined to go further, albeit stating the government was prepared to take whatever measures necessary. 
  • Italy suspended mortgage payments, announced a plan for €10 billion of economic stimulus, and banned short selling.  
Image Source: Lucas Jackson/Reuters via The Guardian

North America 

  • Over the course of the week, the Dow fell over 28% from its recent peak. Thursday marked the Dow’s worst single-day decline since 1987. Over the past twelve months, the Dow is down 9.36%, the S&P down 16.78%, and the Nasdaq 9.9%. 
  • The Cboe Volatility Index (VIX), the market’s fear-o-meter, reached its highest level since 2008. 
  • On Thursday, trading in the U.S. was suspended for the second time in the week. A sharp sell-off had followed U.S. government movements on coronavirus, such as the decision to ban travel from most of Europe.  
  • U.S. equities rallied somewhat on Friday with indications from Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi that a stimulus agreement was imminent. The rally was the biggest jump in eleven years, although the significance of that was diminished by the overall volatility of the week. 
  • The U.S. Treasuries market experienced uncharacteristic uncertainty. The yield on 10-year Treasuries dropped below 0.35% overnight before markets opened on Monday, climbing to 0.9% by Friday. The Federal Reserve tried to stabilise the Treasury market on Thursday by injecting $1.5 trillion in liquidity into the market. 
Brent Crude Oil Commodity Price
Image Source: Business Insider

Other Markets

  • With the rather inopportunely-timed oil price war between Russia and Saudi Arabia, crude oil prices sank over the week. The price cuts caused a sell-off in U.S. high-yield corporate bonds, many of which come from energy companies, some of whose existence is now threatened by the price war. On Friday, oil closed at $33.85 per barrel; in December, it had reached $68.
  • The Brazilian government revised its 2020 growth forecast from 2.4% to 2.1%. The  Bovespa Index dropped 15.7% with conflict over a coronavirus spending bill. 

Cover Image Source: Drew Angerer/Getty

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

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