InvestNow News – 27th Mar – Milford – Impact of coronavirus (COVID-19) and government responses

17th March – Wayne Gentle – Chief Investment Officer & Head of Australian Investments

We appreciate many of you will be feeling unsettled by the current and unfolding situation impacting our lives and the world’s financial markets. We want to keep you informed of this fast-moving situation which is receiving a very high level of media coverage.

Since our update last week, markets have continued to experience heightened levels of volatility as a result of the increasing spread of the coronavirus (COVID-19) and significant responses by many governments.

The coronavirus spread has accelerated over the course of a week. Europe is currently the epicentre, whilst containment measures in places such as China and South Korea seem to have markedly slowed the spread. Governments continue to respond by implementing social distancing measures. These range from closing bars and restaurants, shutting borders and for some countries such as Italy and Spain, closing down the entire country.

We have noted in previous communications that whilst these measures slow the spread of the virus, they can carry a high economic price. Further issues can arise when businesses run into financial difficulties, causing knock on problems for employment and banks that lend money to these businesses.

Governments and central banks have tools available to mitigate these economic impacts and limit the spillover to employment and lending. We have already seen action taken by monetary authorities both in NZ and abroad in the form of interest rate cuts and asset purchases designed to reduce stress on the financial system.

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