The Australian stock market has now seen the worst since the 2008 financial crisis. Fears over a complete global epidemic have wiped $140 billion clean off the market, signalling the beginning of Australia’s recession.
The ASX200 drops to 5,760.6 from 7.3 percent with a compounding three percent plunge last Friday after a steep fall in crude oil prices and the stifling of global economic progress due to the virus.
Chief Market Strategist of CMC Markets, Michael McCarthy, expresses his disbelief after seeing what he dubs as the worst drop in a single day since the Global Financial Crisis. He says that he only saw a handful as destructive as this on the stock exchange throughout his 35-years in the industry.
For numerous investors, McCarthy says this is going to be a first-hand experience of what looks like an impending market crash.
The Australian stock market has suffered losses of over $440 billion since reaching a record of 7289.7 points on the 20th of February. Since the local market crashed, the ASX has dropped 19.6 percent – that is .4 percent shy from the result being a bear market.
With these events, a widespread market sell-off ensues as travel bans induced by the panic has crippled the economic supply chain. The Victorian health minister, Jenny Mikakos, declares this a public health crisis of unparalleled nature.
Saudi Arabia reduced its official retail price of oil stocks by more than one-fifth after announcing a rise in production. Some experts forecast a possible drop in retail petrol prices of as low as $1 per litre soon. Even the Australian dollar has dropped in value after the global market sell-off, dropping exchange rates to 63.98 in US cents.
Bloomberg Economics and Westpac forecast a recession in Australia this year – a first since the early 1990s. Westpac predicts a 0.6 percent decrease in the economy from January to June. However, Bloomberg declares it to be 0.7 percent. Considering the rising numbers of confirmed Covid-19 cases, mainly from those who travelled abroad, a market crash is inevitable.
On Monday, in New South Wales, two schools have shut down after three children have been diagnosed with the virus bringing the number of cases to forty-six. On the other hand, Victoria and Queensland have 15 each. Currently, the number of cases has risen to 91 across the country, with three reported deaths.
The global epidemic claimed 3,800 lives for the past months, with over 100,000 confirmed cases across 94 nations with most victims from China. However, South Korea, Italy, and Iran now have over 6,000 confirmed infections.
Josh Frydenberg, Treasurer of Australia, has motioned to reveal a looming stimulus package soon. Once declared as modest, the package has now been dubbed substantial as it can counteract against the economic effects of the coronavirus. Possibly, running to $10 billion, it is expected to support Australian households and businesses during supply chain instability or shutdowns.
He adds that the Australian government, with fiscal policies, and the Reserve Bank’s aid, can continue in providing confidence to Australians amidst the economic chaos brought by the virus.
Frydenberg mentions a conversation with Rod Sims, Australian Competition and Consumer Commission chairman, on Monday. He asked Sims to ensure him that the lower prices in oil would benefit the consumers, after having dropped by 47 percent since the start of the year.
He wants to remind the regulator of the importance of making the oil industry accountable and guaranteeing that Australians will benefit from the drop in oil prices. Volatility, according to Frydenberg, is not uncommon; he mentions that the oil price in the Australian stock market has been gradually dropping in recent weeks.