World stocks plummet into bear market, Wall Street halts again
European shares hit lowest since 2013, oil slumps, gold sinks, bitcoin plunges 25%
NEWYORK: Global stocks plunged into a bear market and oil slumped further on Thursday after stimulus efforts from the European Central Bank (ECB) failed to calm investors alarmed by US moves overnight to restrict travel from Europe over the spread of the coronavirus.
Trading was halted for 15 minutes shortly after the open in New York after the S&P 500 index fell more than 7%. It was recently trading down 6.8%.
US President Donald Trump restricted certain travel from Europe to the US in a televised address about the health crisis on Wednesday, shocking investors and travellers, and disappointing traders hoping to see broader measures to fight the virus.
“It’s not just the fear of the economy going weak, but basically being on the brink of shutting down,” said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.
“It’s mass selling across the board (and) we are pricing in a potential to go into another financial crisis.”
Trump said the US would suspend all travel from Europe, except the UK and Ireland, for 30 days starting on Friday. He later said trade would not be affected by the restrictions.
Worry spread far beyond stocks, with concern building over companies’ lines of credit and their ability to finance activity in the short term.
ECB APPROVES FRESH STIMULUS
The ECB approved fresh stimulus measures and temporarily dropped banks’ capital requirements to help the euro zone cope with the shock of the pandemic, but kept interest rates on hold, disappointing markets.
The Dow Jones Industrial Average (DJIA) fell 1,905.67 points, or 8.09%, to 21,647.55, the S&P 500 lost 187.32 points, or 6.83%, to 2,554.06 and the Nasdaq Composite dropped 490.83 points, or 6.17%, to 7,461.22.
The pan-European STOXX 600 index lost 9.89% and emerging market stocks lost 6.63%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 5.78% lower, while Japan’s Nikkei lost 4.41%.
MSCI’s gauge of stocks across the globe shed 7.40%, down more than 20% from its 52-week peak.
Investors also rushed into safehaven assets, from bonds to the yen. Bitcoin plunged 25%, amid wild volatility in cryptocurrency markets.
The VIX volatility index—Wall Street’s “fear gauge”—and an equivalent measure of volatility for the Euro Stoxx 50 hit their highest levels since the 2008 financial crisis.
Fed fund rate futures are now pricing in a 1 percentage point cut, rather than 0.75, at a policy review next week.
The euro weakened after the ECB stimulus announcement.
Demand for dollars via the currency derivative markets surged to the highest levels in years in a sign that coronavirus-induced economic stress is starting to manifest itself in a broad scramble for funding in dollars.
The dollar index rose 0.996%, with the euro down 1.08% to $1.1145. The Japanese yen weakened 0.54% versus the greenback at 105.14 per dollar, while Sterling was last trading at $1.2622, down 1.54% on the day.
Meanwhile, DJIA was on course for its worst day since 1987. Airline stocks tanked 14.4%, while cruise liners plummeted between 17% and 23%.
THE DOW JONES WAS ON COURSE FOR ITS WORST DAY SINCE 1987, WHILE AIRLINE STOCKS TANKED 14.4% AND CRUISE LINERS PLUMMETED BETWEEN 17% AND 23%