Following March’s collapse in share prices, global stock markets made a partial recovery in April, although most major indices still sustained double-digit losses compared with the start of the year. Meanwhile, data released in April provided tangible evidence of the initial economic impact of the coronavirus pandemic.
- The IMF expects the global economy to shrink by 3% this year
- Key economies – including the US, China and the eurozone – contracted during Q1
- The oil price plunged to its lowest level in over 20 years
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Following March’s collapse in share prices, global stock markets made a partial recovery in April, although most major indices still sustained double-digit losses compared with the start of the year. As the coronavirus pandemic continued to cut a swathe across the world, the World Health Organisation (WHO) reported that 3,090,445 cases of COVID-19 had been confirmed by the end of April, with 217,769 deaths recorded. During April, the FTSE 100 Index rose by 4%, while the Dow Jones Index climbed by 11.1% and Japan’s benchmark Nikkei 225 Index rose by 6.7%. In Europe, the Dax Index increased by 9.3% and the CAC 40 Index rose by 4%.
“Unavoidable declines in trade and output will have painful consequences” (WTO)
A sharp slowdown in global economic activity drove down the price of oil to its lowest level for more than 20 years, and Brent Crude oil dropped below US$20 per barrel. The World Trade Organisation (WTO) expects global international trade to contract sharply this year, and the decline could range from a “relatively optimistic” 13% to as much as 32%. The WTO predicted that “unavoidable declines in trade and output will have painful consequences for households and businesses, on top of the human suffering caused by the disease itself”. Meanwhile, Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva warned that the pandemic could result in the “worst economic fallout since the Great Depression”. The IMF expects the global economy to shrink by 3% this year, before posting a “partial” recovery next year with growth of 5.8%, but reiterated that the outlook remains highly uncertain.
Data released in April provided tangible evidence of the initial economic impact of the coronavirus pandemic. In China, where the first instance of the virus was reported at the end of 2019, the country’s economy shrank by 6.8% year on year during the first quarter of 2020, compared with growth of 6.4% in the same period last year. The US economy contracted at an annualised rate of 4.8% during the first quarter of 2020, having grown by 2.1% in the final quarter of 2019. Elsewhere, the eurozone’s economy shrank at an annualised rate of 3.8% during the first quarter, registering a more severe quarterly decline than during the financial crisis. Meanwhile, in the UK, IHS Markit warned that economic growth in the second quarter is likely to contract “to a degree previously thought unimaginable”.