Corona Markets: A regional outlook of the economic effects from the COVID-19 pandemic on financial markets

Since it was declared a global public health concern on January 30, 2020 by the World Health Organisation, coronavirus has affected almost all aspects of human life; and it continues to make headlines every day as pharmaceutical and medical laboratories work tirelessly to find the key to unlocking its DNA sequence and come up with a working vaccine.

International trade has been badly hit, as China – a world leader in the production of consumable goods – was the most affected, with the highest casualties running into thousands as of today. The United States, United Kingdom, The Eurozone, Africa and the rest of the world have in one way or another seen a halt or drastic decline in business activities, as the world economy is estimated to have lost billions of dollars already.

Major exchanges in the world – New York Stock Exchange, London Stock Exchange, Frankfurt Stock Exchange and Tokyo Stock Exchange – have all experienced massive drawdowns in prices of their major stock indexes like the DJ30, Nasdaq, FTSE100, DAX30 and Nikkei 50. This is in response to distorted demand and supply conditions at the global scale.

North America: The United States

The United States Dollar Index, which measures strength of the US dollar against a basket of other major trading currencies in the world, has shown sharp variations in value over time in response to market perceptions and psychology of players.

This, coupled with stagnation of business activities and low demand from China and the Eurozone, has had corresponding effects on prices of all major commodity classes: like precious metals – gold, silver, copper; agricultural commodities; cocoa, cotton, coffee and energy commodities; crude oil, natural gas and gasoline – which puts major producers or exporters of such commodities into serious financial stresses many never perceived.

What’s even more profound is how this development affects the recent historic trade deal between China and United States, in which about US$200billion worth of goods and services would be exchanged between the two global economic superpowers.

Chart of US$ Index since December 13, 2019.

Rise in value was steady at beginning of the year till a sharp drop in mid-February to around March 10. This had a corresponding result of higher prices for commodities, which are all priced in US$, and lowering prices of quote currency pairs like US$-CA$, US$-CHF, and US$-GH¢ etc. The reversal, which began shortly after confidence was restored, resulted in reduction of prices for commodities, and forex pairs like GBP-US$, EUR-US$, AU$-US$, and NZ$-US$.

New York Stock Exchange, for instance, has recorded record low prices for Nasdaq, S&P 500 and Dow Jones in the past few weeks; and an attempt by the Federal Reserve Board to revive the stock market by cutting rates to zero and launching a US$700billion quantitative easing programme proved futile – as the S&P 500 on Monday, March 16, triggered the ‘circuit breaker’ trading halt, a not-so-new experience on the Nasdaq in the past few weeks where the triggering has occurred twice; bringing trading activities to a temporary halt as prices keep dropping to lower lows.


The Standard and Poor’s 500 Index and Dow Jones Index both showed similar patterns as uncertainty gripped the markets. Zero interest rates was supposed to restore market confidence, but the response from the Federal Reserve action was a display of nonchalance in the patterns. Clearly, the problem seems more of psychological one, which will be curbed when a vaccine is found or news about its progress or human trials tend to be positive.

At the close of trading on Friday, March 20, the Dow had lost 913.21 points from the previous close – representing a percentage change of -4.55 percent. S&P 500 was down 104.47 points, representing -4.34 percent; and NASDAQ followed with a further drop of 271.06, which translated into -3.79 percent.

The performance of major indexes on Wall Street sends a strong signal to potential job losses in the coming months. A lockdown is currently in session and major sports and entertainment events, notably the NBA – which over the past five years has generated an average revenue of US$7billion (US$8.76billion last season alone) – have been suspended.


Being 6th and 5th respectively in global production of crude oil and natural gas, it is quite evident how price changes of the commodity affect the economy of Canada. Crude Oil and Natural Gas contributed US$108billion to the Canadian Economy in 2018, and provided direct and indirect employment for some 530,000 people in 2017. Over 95 percent of Canada’s oil is sold to the United States, to the tune of over 2,000 barrels a day.

The outbreak of a coronavirus pandemic coupled with recent unrest between the United Arab Emirates and Russia led to a price war, with oil prices dropping to record low levels. This represents massive losses to the Canadian dollar, which has fallen sharply to the US dollar in the past few weeks.

See Also:  Cocobod’s subsidiary QCC granted ISO/IEC certification for cocoa inspection …as US$ 1.5m GQSP takes off

Brent Crude Oil, which is a benchmark for world oil pricing, currently trades at a price below US$28 per barrel, while the West Texas Intermediary WTI trades below US$24 per barrel. USDCAD traded at 1.3004 as at January 1, now trades at 1.4362 – which represents a depreciation of CA$ of 8.46 percent relative to the US$.

USDCAD price since November 29, 2019.

A sharp rise in the value of the USDCAD corresponded with an announcement by the UAE it would slash oil prices in the first week of March.

Latin and Central America

The situation is no different in the Latin American Region either. Brazil and Mexico, which are the two economic giants in the region, depend a lot on China for goods for their manufacturing businesses in the areas of automobile production, machinery and equipment, and electronics. A disruption in supply from China clearly spells a drastic reduction in manufacturing output.

Imports of intermediate goods by Mexico from China makes about 8 percent of their manufacturing value added, and 6 percent for that of Brazil. Imports from China make up about US$70-80billion, i.e. 6 percent of their GDP; while that of Brazil is US$35billion, i.e. 1.7 percent of their GDP. This makes Mexico more exposed to disruptions in global supply chains, as 34 percent of its GDP earnings come from exports compared to Brazil’s 13 percent.

The Chilean peso has over the past three months depreciated by 14.286 percent to the US$, mostly due to impact of the COVID-19. Chile exports a third of its goods to China, which represents 9 percent of its GDP; and hence lower downturn of business in China is a direct hit to the Chilean economy.

Argentina, Colombia, Ecuador and Peru are also similarly exposed, but mainly due to reduction in commodity prices which has come about as a result of lower demand from their major trading partners. Travel restrictions and travel bans across the world will adversely affect the Caribbean Islands, which make a substantial amount of their GDP from tourism.


China’s woes in these times cannot be explained any further. It is obvious for all to see even the ripple-effects it has on the rest of the world. Lifestyles, businesses and human health have all been greatly hit by the initial epidemic which started at the Wuhan region and now escalated to a global pandemic. However, with reports of life gradually returning to normal, the Chinese Markets especially have shown a turnaround – and the rest of Asia region is showing signs of hope.

Asian Stock Markets rose steadily by close of trading on Friday, March 20, 2020. Chinese Indexes – FTSE China 50, Hang Seng, Shangai and SZSE Component – recorded gains of 1044.56 (7.1 percent), 1095.94 (5.05 percent),43.49 (1.61 percent) and 130.29 (1.30 percent). Australia’s S&P/ASX 200 made gains of 33.70 points (0.70 percent); New Zealand’s NZX50 and NZX Midcap realised 81.89 points (0.90 percent) and 49.98 (1.16 percent) respectively. Korea’s KOPSI and KOPSI 50 came in quite strong with 108.51 (7.44 percent) and 100.49 (7.24 percent) respectively.

Japan, expecting revenues from the Tokyo 2020 Olympic Games, can do nothing but watch the opportunity they bid for slip through their fingers in the midst of chaos and desire to save human life. Their projected revenue of US$5.9billion remains but in a fleeting illusion.

China, Japan and Korea – which are all leading importers of energy commodities – being struck by the virus signals a huge glut in the market and impending job cuts in the energy markets in the very near future.


The strong negative correlation between the euro, which makes up 57.6 percent of the Dollar Index and US dollar could not have been depicted any better in these times. However, the corresponding positive effect of a weaker euro on manufacturing businesses whose exports become significantly cheaper to the world markets is not being reflected on exchanges across Europe – especially the DAX30 on the Germany Exchange.

The British pound, which traded at 1.31178 by close of market on January 7, closed on Friday, March 20, 2020 at 1.15938 to the US$ has seen a depreciation in value of 11.618 percent.

The major indexes – FTSE100, DJ_EUR50, CAC 40 etc. – have all seen major sell-offs as witnessed on New York Stock Exchange as lifestyles have been drastically altered; and the agenda of the day is how to prevent the loss of human capital through spread of the virus.

Football, a major revenue-generating activity across Europe, has been literally brought to a standstill as death tolls and cases of infections are still on the increase in Italy and other neighbouring countries.  The 25.1 billion pound sports market has been brought to standstill.

It is however hopeful that the European central bank’s 750billion euro Pandemic Emergency Purchase Programme, announced on Wednesday, March 18 – which aims to purchase public and private securities in a bid to lower their spreads and has widened in these times of uncertainties – will bring back some stability to the zone, as it is certain that the challenge faced by Italy, Spain and France will be systemic for the entire bloc.

See Also:  Ghana insurance industry selected to bid for international conference


South Africa

After markets closed beginning in the third week of March, the Johannesburg Stock Exchange recorded a drop in 38,784 points – its lowest level since August 2013. The JSE Africa All share index has also seen a fall by a substantial 12 percent, while the rand which currently trades at 17.64 to the US$ represents a depreciation of 18.98 percent over the past three months. In a report by Reuters, the market capitalisation of the exchange at the beginning of the year was 17 trillion rand but is now down to 12.5 trillion rand – representing a loss of 4.5 trillion rand.


As at March 10, Nigeria’s Stock Exchange all share index fell 4.91 percent to close at 24,388.66 against a previous record of 2.41 percent. It’s year to date returns currently stand down at 9.14 percent. The market took huge hits by MTN (-10.0 percent), GUARANTY (-9.9 percent) and ZENITH (-9.7 percent). The banking index had fallen by 12.53 percent, Consumer Goods Index by 4.42 percent, while the Industrial Index was down by 1.10 percent.

With regard to crude oil, Nigeria being the largest producer in Africa and a key member of OPEC has been severely hit – just as was the case of Canada.  According to Reuters report, Nigeria depends on crude oil for over 60 percent of its fiscal revenue while a whopping 90 percent of its foreign exchange inflows come from proceeds of the oil market.

The three-year US$2.4billion currency swap agreement between Nigeria and China in April 2018, which eliminated the need for Naira to be exchanged for US$ in trading with China, has not been enough to check local demand for US$ even in times when China is at a standstill.


The Ghana Stock Exchange Composite Index at the end of February recorded a year to day change of -2.1 percent from -3.62 percent last year, while the GSE Financial Stock Index recorded -2.73 percent from -2.22 percent the previous year. Market Capitalisation remained fairly static with a year to date value of -0.46 percent from -2.46 percent. Domestic Capitalisation went down further by -1.1 percent from -3.58 percent same time last year, which overall represents a retrogression in business output so far this year.

With regard to our major subsector, cocoa, it is commendable to say that the agreement reached with buyers of cocoa beans mid-2019 to set a floor price of US$2,600/tonne has proven beneficial, as price of the commodity – though down to record low levels at US$2,278 currently – saves the economy US$322/tonne. This represents an overall figure of US$273.7m based on the projected production forecast of 850,000tonnes for this current crop season.

Cocoa price chart shows price levels were above the US$2,600 benchmark from mid-January till mid-February when prices began to decline steadily, and then sharply toward the end of February. Prices broke the US$2,600 level early March this year when the waves of COVID-19 pandemic intensified.

It must be noted, however, that there is a tendency for the oil price drop which has put the Nigerian economy in a state of despair to affect Ghana immensely in the short- to medium-term, as Nigeria is currently experiencing a shortage of US dollars. This stems from the fact that their annual budget of US$37billion was passed with the expectation of crude oil prices hovering around US$60 per barrel – which at the moment hovers around sub-US$25 levels and therefore does not have the capacity to fund its budget.

Though on the formal forex market the USDNGN trades around 370, it is currently being traded at around 430 naira on the informal black market in Nigeria.

Disregarding the Nigerian economy’s size of US$446billion and considering that of Lagos alone – its main commercial hub with a GDP of US$136billion – and our long history of business and cultural exchanges, it would not be far wrong to expect them to enter our markets and create a shortage of US$ in circulation; thereby tilting the trading position of the GH¢ to levels which could be unbearable for businesses in the long run, post the coronavirus period.

>>> J. K. Darko holds a BSc in Agricultural Engineering from KNUST, MSc Development Finance from UGBS and Securities and Investment Certificate from Ghana Stock Exchange. He’s been in the banking industry for the past six years and is also into retail trading of currencies, indexes and commodities on the financial market.

Article Rating
Notify of
Inline Feedbacks
View all comments