Introduction
Since the outbreak of the coronavirus, the economic condition of the world has been at stake. For instance, in the case of the European economy, the pandemic has caused many people to lose their jobs most of which are non-white workers, women, and those less educated. It has also affected industrial production capacity (NIELS and RALPH 12). The production level has drastically been dropping, hence affecting the manufacturing sector which is the source of employment for approximately 13 million people. In this report paper, I will discuss how the European stock will be affected if coronavirus cases continue to rise until spring 2021.
Effects Of COVID 19 Flare-Ups To European Stocks
COVID 19 flare-ups and the newly implemented lockdown measures have caused the performance of European stocks to perform the worst during the past months (Kraemer-Eis 21). Inventors have been forced to dump shares because the decline in stocks has wiped out the stock and post gains. In the eleven economically sensitive sectors, traders have jolted stocks (Matt 8). Even the tech sector, which was assumed to be immune to the effects of COVID 19, has been clutched. Investors are afraid to carry out their businesses as they would face huge losses. Thus, they have turned to the government to seek safety (Kraemer-Eis, Botsari and Gvetadze 48).
On October 12, this year, the stock posts 500 had increased by nine percent (Kraemer-Eis 17). The investors had begun to become confident that the white house and congress would produce a new deal to of stimulating the federal before the occurrence of elections. However, due to the continuous rise in the cases of the coronavirus, the economy of European countries is worsening, thus the flow of fresh federal dollars which could be used to help boost consumer spending and small businesses is not assured (NIELS and RALPH 13).
The European markets had grown so much over the past years. However, the outbreak of coronavirus, which led to its implementation of new measurements to enable slow down its spread, has cause reverse and bounce back of the growth in months (Arthi and Parman 32). The latter has been caused by stocks sales crumbling down (Kraemer-Eis, Botsari and Gvetadze, European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets (No. 2020/67)). As much as investors are trying to overlook the vital economic problems that they are experiencing, they are still in distress because the pandemic continues and the lockdown restriction measures are still in operations, the most industries are likely to stop operating for good.
The economists believed that as soon as coronavirus is vanquished from the world, the economy will quickly shoot up (Kraemer-Eis, Botsari and Gvetadze 44). Thus, the invention of a coronavirus vaccine was a source of joy and hope to many inventors and economists. However, it is now evident that that is not the case. Reports have been generated showing that the invention of the vaccines will only slightly accelerate the ending of the virus (Kraemer-Eis, Botsari and Gvetadze 45). The latter means that economic shutdowns will go on for a while. According to McKinsey research, the effects of the pandemic on Europe and European countries are likely to extend up to the spring of 2021, and full immunity is likely to be not realized until the third quarter of 2021.
The latter means that businesses will carry on to be challenged due to the rapid escalation of the situation (NIELS and RALPH 21). The financial stability of the economy will continue to destabilize because supply chains demand off households and which is the backbone of the economy is negatively affected by the pandemic (Matt 12). When the current state continues, many countries across the globe, especially the European countries will continue to suffer. Their pricing status will go up thus making consumption expensive for the consumers. The stocks will be idle since no investor is willing to invest in a commodity that will not have little or no profit. Once the economy of economic giant countries like Europe is affected, it means that the economy of many other countries will be affected too (Kraemer-Eis, Botsari and Gvetadze 53). The latter is because it will affect the value of the dollar which is a standard currency used to measure the value of currencies used across the globe.
According to the report given, the united states and European union equity markets have dropped by approximately thirty percent between mid of February and mid of March. This is a big drop that has not been experienced for many years (NIELS and RALPH 14). The value of the stock equals the summation of all the value discounted o all the future dividends. The latter means that as the stock market continues to fall, the value of dividends will also fall. The drop witnessed has discouraged and will continue to discourage investors because they have predicted to gain no profits in investing in the stock market (Kraemer-Eis, Botsari and Gvetadze 49).
Therefore, due to a lack of investments, the value of the stock market will continue to deteriorate until 2021. The European markets will not be able to give expected returns, thus making it difficult to predict the number of future cash flows and future growth rates (H. Kraemer-Eis 24). The country will not be able to set budget allocations for the year because they do not know how the stock market will run since the economic sectors are all facing losses that will take an unknown amount of time to regain (Kraemer-Eis, Botsari and Gvetadze 52).
Conclusion
The growth expectations as well as the stock market of Europe are adversely affected by the outbreak of the corona virus. The pandemic preventive measures like lockdown have hindered many economic operations from taking place. The latter has affected the stock market which is the backbone of investors. Thus, putting the future of the European market at stake and at mercy of the ending of COVID 19.
Works cited
Arthi, V and J. Parman. ” Disease, downturns, and wellbeing: Economic history and the long-run impacts of COVID-19.” Explorations in Economic History (2020): 32–36.
Kraemer-Eis, H, et al. ” European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets (No. 2020/67).” European Investment Fund (EIF). (2020): 43-56.
—. “European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets (No. 2020/67).” European Investment Fund (EIF). (2020): 556–662.
Kraemer-Eis, Helmut. ” European Small Business Finance Outlook 2020: The impact of COVID-19 on SME financing markets.” EIF Working Paper (2020): 12-21.
Matt, Phillips. “Stocks Post Worst Day in 4 Months as Infections Rise Around the Globe.” 29 10 2020. NEW YORK TIMES. 26 11 2020 <https://www.nytimes.com/2020/10/28/business/stock-market-coronavirus.html>.
NIELS, GORMSEN and S. J. KOIJEN RALPH. “How the coronavirus affects stock prices and growth expectations.” 26 3 2020. CBR. 27 11 2020 <https://review.chicagobooth.edu/economics/2020/article/how-coronavirus-affects-stock-prices-and-growth-expectationshttps://review.chicagobooth.edu/economics/2020/article/how-coronavirus-affects-stock-prices-and-growth-expectations>.