Why Stimulus Is Not Enough To Combat The Economic Impact Of Coronavirus
Satendra Singh | Apr 07, 2020 05:02AM ET
Global equity indices surged higher on Monday, between 5 – 6%, on renewed strength shown by European equity markets in the wake of a big stimulus ahead.
The EU’s finance ministers will be in focus on Tuesday as they meet to try and agree on a list of measures to mitigate the impact of the coronavirus on the region’s economies. If enough headway is made, the bloc’s leaders could debate and then rubber-stamp a deal later in the week. On the other hand, lowering the number of COVID-19 cases seems to one more factor to extend bullish sentiments among investors.
There is no doubt that a small ray of hope in a difficult situation stimulates positive sentiment among the investors, which may keep their anxiety levels at bay despite the depth of the economic damage. Until we find a complete cure for this disease and control its spread completely, financial stimulus can hardly prove a permanent supportive measure.
Most Asian economies will not able to sustain their lockdowns for a long time due to the damage to their economies, despite a plethora of economic stimulus by central banks.
Finally, I conclude that the complete biological cure of COVID-19 will only be the final stimulus for the global equity markets. The impact of fiscal stimulus has enhanced volatility in financial markets and an extensive upward move in gold, which shows growing uncertainty in global equity markets. This growing uncertainty in global equity markets may trigger sudden bouts of selling/buying spree at any time.
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