Question

Financial markets-The current caronavirus outbreak is said to be affecting the global financial market. Using China and the USA as examples, briefly explain the impact the outbreak of the virus is having on the financial markets of the two countries.

Answer 1

The coronavirus that is now spreading through China and beyond its borders has actually shaken financial markets. Experience with virus outbreaks in the past reveals that markets frequently bounce back rapidly The economic effect on China depends on the Chinese federal government's ability to contain the infection and its policy decisions to decrease its impact Even if the outbreak of the infection turns out to be similar to SARS, its worldwide financial consequences are likely to be greater than in 2002/2003 due to the fact that China has a much greater share of the outbreak. In addition, the economies are much more interconnected than 17 years ago.

While the present crisis may make it much more hard for China to live up to its current agreement to curb United States imports of goods and services by USD 200 billion of goods over the next 2 years, we do not prepare for an additional negative effect on US-China trade relations, as Phase One particularly addresses exemptions in case of a natural disaster.

No verified cases of the infection have actually yet been discovered in the Netherlands. The impact of the break out on Dutch business will be primarily indirect, through international economic growth and belief. The Netherlands is sensitive to international trade (which will get harmed), as a reasonably small open economy. Bearing in mind the function of the Netherlands as an entrance to Europe for China, the transport sector could suffer in particular. However other companies in industries that are exposed to cities that have actually been shut down, consisting of Wuhan, too.

For instance, the Netherlands (according to the Netherlands Enterprise Agency) imports from Wuhan fabric, cellphones, and medical devices and exports marine devices, equipment, and chemicals into the city. It is likely that Dutch businesses that import or provides these goods will be struck.