Select two articles that pertain to cutting-edge international financial developments from reputable sources (i.e. WSJ). The articles should not be older than 10 days from when the assignment is due. In each IFM, there should be a brief summary of the news item, as well as the pros and cons covered in the article/news item. In addition, and most importantly, there should be an analysis of the event, with your reasoned views, with some theoretical and/or empirical justification. An IFM, or a crisp, professional discussion of the “International Financial Management,” will require you to select any two separate news items that pertain to cutting-edge international financial developments. You should select international financial developments pertaining to markets or instruments or institutions which were in the news in the immediate past seven to ten days before the respective IFM is formally due.
In his article “Can the markets be trusted again,” Jeff Sommer is concerned with the reopening of the international financial market as an important financial event affecting the international markets today. In the article, the author is concerned about the international stock market and how it is difficult for investors to have trust in them as they did before the coronavirus pandemic. After the international stock market taking the one of the worst hit decades through the coronavirus pandemic, it started to improve in June. Investors started having confidence in the stock market, and there was a blip in the investment rates, which led to many of the shares increasing by around 20 percent (Sommer, 2020). However, all that gain seems to have been temporal by the fall of general prices of shares in the international stock market.
Sommer reiterates that smart investors tend to buy shares when the prices of the shares are falling. However, the million-dollar question is whether buying shares now would be a wise or a foolish investment? In the recent past, the stock markets’ share prices were predictable, with investors following investment patterns and luck to make profits from the stock markets. However, with the pandemic, the predictability of the international stock market seems to be a fallacy. When investors start regaining confidence in the international stock market and start trading in shares, then the pandemic seems to grow worse, and the market takes another hit.
This article is important in that investors get to understand that they need to be very careful while engaging in the international stock market. However, it discourages investing at this time, thus worsening the international stock market situation because; the more investors decline to trade in the stock market, the greater the level of the negative impact on the international stock market. To this end, it is therefore essential that governments bring public confidence in the international stock market by fighting the pandemic and being involved in the stock market to cushion the investors.
On the other hand, Elliot Smith, in his article “European markets close lower as virus fears offset recovery hopes.” His concern is with the fresh reoccurrence of the coronavirus in the European countries, including Germany as well as the United States. Many businesses that had started to stabilize from the effect of the coronavirus pandemic on Thursday took a dip. This was caused by the fresh rounds of infections of the coronavirus, thus, negating the gains already gained.
Smith notes that governments are, however, taking up measures to minimize the impact of the second wave of the coronavirus. To this end, governments are trying to come up with antiviral drugs against the coronavirus. Recently, Gilead sciences began testing their antiviral drug. The experimental treatment is supposed to guide the next step of the production of drugs (Smith, 2020). Other governments have equally started giving stimulus packages to ensure that their economy is not hit once again with the fresh round of infections. In line with this, the United Kingdom government has offered a back to work bonus for businesses returning their employees to work.
This article gives hope that the European Union is trying its best to ensure that their market does not get affected once again by the fresh infections of the coronavirus. It also shows the devastating effect of the pandemic on the international economy. All governments must take precautions to ensure that the reopening of the economy will not affect the health of the general population.
Smith, E. (2020). European markets close lower as virus fears offset recovery hopes. CNBC. https://www.cnbc.com/2020/07/09/european-markets-economic-recovery-hopes-take-hold.html.
Sommer, J. (2020). Can These Markets Be Trusted?. Nytimes.com. https://www.nytimes.com/2020/07/11/business/mutual-fund-investing.html.
Ackerman’s article examines Coronavirus as one of the cutting-edge international developments in the financial market. Based on the article, 2020 financial year has been influenced significantly by the coronavirus pandemic. The pandemic has almost brought the international financial sector to a standstill. Coronavirus, first of all, interfered with the international movement of finances, goods, passengers, among other things (Ackerman, 2020). Many countries resolved to channel their finances into fighting the virus within their economies. The fight against the virus has proved to be very expensive as countries have had to come up with measures against the virus and, at the same time, come up with treatment measures for the already affected individuals. The situation is so dire that both the World Bank and the International Monetary Fund (IMF) have had to provide countries with emergency funds to fight against the Covid-19 virus.
Ackerman (2020) noted that following the dip in the trade, financial movement, and general lockdowns, the international financial market has been significantly affected. To this extent, the international financial market has been adversely affected. Therefore, international lawmakers have come up with stop-gap measures to try and revamp the worldwide economy and the financial market, but the international market is not out of the woods yet. The measures are not yet successful as the bulk of the money has been allocated to the health sector to curb the outbreak rather than to be used to generate wealth.
However, Ackerman pointed out that it is not all doom and gloom as indications show that the international financial market is picking up, and the trajectory is to the positive side (Ackerman, 2020). To couple this up, the pandemic has led to the positive growth of online businesses, with most investors opting for online investment rather than physical investment in the countries (Ackerman, 2020). The only challenge with online investment is that their rate of online fraud has increased, coupled with the fact that it is never easy to trace and prosecute online crimes.
Rankin’s article from the Guardian noted that a current trend in the international market is the recession in the European Union. Furthermore, it highlights that the United Kingdom is expected to suffer much more effectively than other countries (Rankin, 2020). This is because of BREXIT. Thus, the United Kingdom is expected to pay for much more in trade than other countries within the European Union. On the same footing, the European Union’s economic recession is expected to be the worst ever experienced (Rankin, 2020). This is because the overall breakdown of trade in the European Union and the attempt to restart the economy could be regressed by fresh outbreaks of coronavirus.
The indecisiveness further increases the fears on whether to offer loans or grants to the countries affected. As four countries are urging for loans to be given to the members, others are rooting for grants, thus leading to a stalemate on how to distribute funds to be used in the reviving of the economy. Countries such as Germany is in support of grants, reasoning that loans will only pile up loans for the countries, making matters worse for the countries than improving them. On the other hand, countries like Austria, Sweden, Denmark, and the Netherlands are rooting for loans because it would ensure that the money given will be recovered. The stalemate has made it impossible for the European Union to act decisively in support of their member countries.
European Union is one of the powerhouses in the international financial market which means that the international financial market has been affected to a great extent. The earlier a solution is reached, and the economy reverts to normal, the better for the international financial market. It is also important to note that the international financial market depends heavily on the success of other sectors of the international market. It is, therefore, imperative to ensure that there is a resumption of the full activities in the international market. For other countries like the United States, the economy is opening up, but the gains made have been lost through fresh outbreaks of the virus.
There is, however, an encouragement that we can take from all this. First of all, it is clear that there is a plan to get European Union out of the tight fix that it is in currently. A huge amount has been prepared to revamp various economies of the world and not just the European Union but all the trade blocks in the world. Thus, there is hope for many countries and, in essence, the international financial market (Rankin, 2020). The major problem in all this is that many businesses have been affected. Even the amount set aside to revamp different economies may not be enough to bring all the economies back to normal.
However, it is important that the funds needed to revive the economies to be given as grants to the various affected economies. This would help reduce the debt burden to the affected economies, which are currently struggling with the depression. In conclusion, it is essential to note that despite the international financial market-facing different challenges, there is hope that with time everything will be ok.
Ackerman, A. (2020). Covid Still Poses Challenges for Financial System, Fed’s Quarles Says. WSJ.https://www.wsj.com/articles/covid-still-poses-challenges-for-financial-system-feds-quarles-says-11594142649?mod=markets_lead_pos3.
Rankin, J. (2020). Europe faces deep recession, and UK will shrink by 10%, says EC. the Guardian.https://www.theguardian.com/business/2020/jul/07/europe-recession-uk-ec-eu-recovery-plan.