Global stocks have plunged again despite
central banks around the world announcing a coordinated effort to ease the effects
of the new coronavirus.
The Dow Jones index closed 12.9% down after President Donald Trump said the
economy “may be” heading for recession.
Meanwhile, London’s FTSE 100 ended 4% lower, and other major European
markets saw similar slides.
On March 15, the Fed cut its interest rates by 100 basis points to a target
range of 0% to 0.25% and said it would offer at least $700 billion for support
to the markets in the coming weeks.
The move was part of coordinated action announced alongside the eurozone,
the UK, Japan, Canada, and Switzerland.
It comes as local officials across the US shut schools, restaurants and
bars, sports leagues cancel tournaments, and retailers such as Urban
Outfitters, Nike, and Gap announce hundreds of temporary store closures.
Speaking after the announcement, Fed chairman Jerome Powell said: “The virus is having a profound
Investors are worried that central banks now have few options left to combat
the impact of the pandemic.
In New York, steep falls as markets opened triggered another automatic halt
to trading, which is meant to curb panic selling. Before last week, such halts,
known as circuit breakers, had not been used in more than two decades.
However, the sell-off continued after the 15-minute suspension, with the Dow
losing nearly 3,000 points or 12.9%, its worst percentage drop since 1987.
The wider S&P 500 dropped 11.9%, while NASDAQ dropped 12.3%. All three
indexes are now down more than 25% from their highs.
In London, companies in the travel sector saw big falls. Share in holiday
company Tui sank more than 27% after it said it would suspend the
“majority” of its operations. BA-owner IAG fell more than 25% after
it said it would cut its flight capacity by at least 75% in April and May.
The FTSE 250, which includes a number of well-known UK-focused companies,
ended down about 7.8%.
All the main European share indexes fell sharply, though they later regained
some ground. France’s Cac 40 index fell more than 5.7% and Germany’s Dax
dropped more than 5.3%.
In Asia, Japan’s benchmark Nikkei 225 closed down 2.5% and the Shanghai
Composite in China ended the day 3.3% lower.
Oil prices, which have been shaken by a price war between exporters, fell again. Brent crude dropped by more than 10% to less than $32 a barrel while West Texas International crude fell more than 8% to less than $30 a barrel.
Global stock markets have fallen after some members of the Federal Reserve suggested its stimulus measures may be increasing the “risks of future economic and financial imbalances”.
The comments came in minutes of the Federal Reserve’s last meeting, where the Fed said it had left its monthly $85 billion bond-buying plan in place.
US markets opened lower on Thursday after recording their biggest drop so far this year on Wednesday.
European markets all closed down.
The Fed comments have raised expectations that the US central bank may scale back its bond-buying programme earlier than predicted.
Currently, the Fed is carrying out its plan of buying $85 billion of bonds a month until the US jobs market sees a substantial improvement.
By buying bonds, the Fed keeps interest rates low, which keeps the cost of borrowing for mortgages and other loans low.
However, the minutes of the Fed’s meeting in January showed that some members were concerned that the bond-buying programmes could push up inflation or could “foster market behavior that could undermine financial stability”.
The minutes said that “a number of participants” commented that an ongoing review of the effectiveness of the bond programme “might well lead the committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred”.
Global stock markets have fallen after some members of the Federal Reserve suggested its stimulus measures may be increasing the risks of future economic and financial imbalances
The bond-buying programme has been cited as a major reason for the rise in share prices in recent weeks, so signs of a premature end have hit stocks.
“US liquidity concerns following the Fed minutes looks like the pin which will burst the recent bubble in equities,” said Mike McCudden, head of derivatives at Interactive Investor.
On Wall Street, the Dow Jones index ended Wednesday down 108.13 points at 13,927.54, and continued to fall on Thursday, shedding a further 61 points by midday in New York.
In Asia, Japan’s Nikkei 225 fell 159.15 points, or 1.4%, to 11,309.13, while in Hong Kong the Hang Seng index closed down 400.74 points, or 1.7%, at 22,906.67.
European markets all fell, with London’s FTSE 100 closing down 1.6% at 6,291.54 and the Cac 40 in Paris falling 2.3% to 3,624.80.
The dollar rose 0.5% against the euro on Thursday, with one euro buying $1.3206.
While the dollar had been boosted by the Fed minutes, the euro was also hit by the latest survey of the eurozone region which suggested the downturn in the region’s businesses had worsened.
The latest eurozone purchasing managers’ index (PMI), compiled by research firm Markit, fell to 47.3 this month, down from 48.6 in January. A reading below 50 indicates contraction.
The figure was the lowest reading for two months and appeared to dash hopes that the eurozone’s economy would show signs of revival.
It also indicated a growing divergence between Germany and France, with output rising in Germany but declining at an increasing pace in France.
Privacy & Cookies Policy
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.