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With Europe turning as the epicenter of the COVID-19 outbreak, the European Central Bank has pledged $820 billion as part of the fiscal stimulus measures. Other central banks of France, U.K, and Germany are working on similar lines.
The coronavirus pandemic has pushed the global markets and economies on a tailspin. Over the last month, the global, including European, markets have collapsed severely over the rising COVID-19 cases globally. Europe has been the worst impacted of all with Italy and Spain leading the total death figure in the continent.
The total COVID-19 infected cases in Italy have exceeded over 100,000 with over 12,000 deaths. On the other hand, Spain is also very close to 95,000 cases and over 8,400 deaths. Both these countries have surpassed China in the total tally.
While the European nations have been working emphatically to over this crisis, the European investors are also in severe distress. Data shows that during the first quarter closing as on 31st March 2020, the pan-European Stoxx 600 index has crashed 23.03% in the first quarter. This is extremely close to the 2002 Q3 performance when the index dropped 23.33%.
Let’s take a look at some of the individual market performances.
- Among all major European indices, Spain’s IBEX 35 has experienced the biggest plunge. The IBEX 35 has corrected 28.94% in its worst-ever quarterly performance.
- Similarly, Italy’s FTSE MIB has also recorded its worst-ever quarter falling 27.46%.
- France’s CAC40 has crashed down 26.46% during the first quarter, Germany’s DAX has dropped 25% and U.K. FTSE 100 has crashed nearly 24.8%.
The scenario is quite similar in other parts of the globe and major economies with their stock markets crashing anywhere between 20-30%.
European Central Bank Elevates Its Fiscal Spending to Support Markets
With the European markets and economies going to a tailspin, the central banks as opening their fiscal-stimulus taps as part of reviving the economy. The European Central Bank has recently poured $750 billion EURO as part of the “Pandemic Emergency Purchase Programme”.
With Europe now becoming the epicenter of this pandemic, investors are waiting on the sidelines closely watching the actions initiated by the governments and central banks. But if the pandemic situation continues for long, how long can these fiscal stimulus measures support the economy.
Charalambos Pissouros, senior market analyst at JFD Group says that investors won’t enter the markets anytime soon. With the daily COVID-19 cases increasing rapidly, the situation is absolutely unclear at this stage. Pissourours said that for investors to change their view, “a vaccine has to be ready for distribution, and the vaccine, in this case, is not fiscal spending, neither monetary policy easing.”
Fidelity International Equities Portfolio Manager Amit Lodha, suggests that investors should only watch for cyclical businesses. Cyclical businesses are the ones whose success is closely associated with the economy. Thus, they tend to fluctuate with the economic cycles.
Lodha suggested that the economy recovering steps will have to be robust. He also hinted at a possible “Marshall Plan”, a U.S. Initiative designed during World War 2 to help revive the European economy.