Further volatility ahead for Australian financial market led by concerns over Coronavirus pandemic

Market news update 4th March 2020


Wednesday, 4th March 2020 - Adelaide, 9:34am (GMT+10:30)

The Dow Jones Industrial Average slid almost 800 points on Tuesday after gaining about 300 points. This came despite the U.S. Federal Reserve cutting interest rates by half a percentage point ahead of its monetary policy meeting. The SP 500 and the Nasdaq decline sharply while 10-year Treasury bond yield dipped below one percent for the first time.

Locally, the ASX 200 broke a seven-day losing streak on Tuesday after the Reserve Bank cut its cash rate to a record low. Risk of global economic slowdown led by the outbreak of coronavirus has grown over the past 2 weeks. Supply chains from China to businesses worldwide have been affected. Some factories remain closed while others are operating at limited capacity, giving rise to concerns that inventory shortages will continue. Small businesses have been affected the most as factories prioritize a backlog from large firms with massive orders.

The slowdown in China are just beginning to affect businesses around the world that are heavily reliant on China. Locally in Australia, the education and tourism industry are starting to see the impact. Businesses that generate most of their income from Chinese tourists are also likely to be affected the most. Many Chinese eateries locally have already seen a sharp drop in sales over the last two months, prompting some to close it's door.

Looking ahead, the local share market may see further volatility following the drop in the Dow Jones and also due to growing concern of economic recession following the bush fires and coronavirus pandemic. Many believes that the cut in the cash rate by the U.S. Fed reserve and RBA may not be enough to prevent any slowdown and panic caused by the coronavirus.