US stocks sink, treasuries rally on coronavirus worry
The S&P 500 fell 7.4%, briefly wiping out 2019 gains
MADRID: US stocks plunged, with losses reaching 11% before being cut by a third, as investors fled risk assets amid the mounting economic toll of the coronavirus outbreak. Treasuries surged despite dramatic moves from the Federal Reserve and other central banks.
The S&P 500 fell 7.4% as of 10:49 am in New York, briefly wiping out all of the gains during 2019’s rally. The index plunged 8% at the open and trading halted for 15 minutes.
Hyper-turbulent financial markets started the week back in risk-off mode, with investors trying to assess the likely extent of the economic damage after countries around the world moved to combat the virus spread by virtually shutting down social activity.
The Dow Jones Industrial Average’s loss from its record reached 30%.
“The market’s in panic mode,” Chris Rupkey, chief financial economist for MUFG Union Bank, said in a phone interview. “The move overnight was a shock and the market isn’t taking it as the Fed officials riding to the rescue. They’re taking it as ‘get out of the way, look out below, this could be really, really bad.’”
The Fed and other central banks have dramatically stepped up efforts to stabilise capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating global economic outlook. An International Monetary Fund pledge to mobilise its $1 trillion lending capacity also had little impact in markets.
The New York Fed’s regional gauge of factory activity plunged. Ryanair Holdings Plc said Monday it will ground most of its European aircraft while a consultant said the pandemic will bankrupt most airlines worldwide before June unless governments and the industry step in. Nike Inc. and Apple Inc. announced mass store closings.
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery,” Jason Daw, a strategist at Societe Generale SA in Singapore, wrote in a note. “However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks.”