World markets plunge following grim news on US, EU economies
Wall St pulls back after big companies detail virus fallout
LONDON, May 2, (AP): Shares dropped in Europe and Asia on Friday after the latest data drove home the extent of economic carnage from the coronavirus pandemic.
Many world markets were closed for May Day holidays. Britain’s FTSE 100 sagged 1.9% to 5,788 while U.S. futures fell sharply, with the contract for the S&P 500 down 2.1% and that for the Dow industrials sank 2%.
Australia’s S&P/ASX 200 plunged 5% to 5,245.90 with heavy losses in miners and banks. A measure of Australian manufacturing showed activity contracting at its worst pace since 2009. That, coupled with news overnight that millions more Americans applied for unemployment benefits in April, darkened the mood after a relatively strong April.
Signs of growing tensions with China, Australia’s biggest trading partner, added to jitters. The two governments are at odds over calls for an independent inquiry into the origins of the coronavirus, with China warning of possible repercussions for imports from the resource-rich country.
Japan’s Nikkei 225 index slipped 2.8% to 19,619.35 as the economy minister, who is heading the government’s coronavirus efforts, said social distancing measures needed to be kept in place to help prevent a resurgence of infections.
“If we relax the measures with insufficient decrease, infections will immediately bounce back and our effort so far will entirely go to waste,” said the minister, Yasutoshi Nishimura. “The experts recommended that the current measures should be kept in place.”
Overnight, the S&P 500 fell 0.9% on the dismal jobless data and news that the economy of countries using the euro contracted 3.8% in the last quarter, its biggest slump since the EU began keeping reporting such data in 1995.
The U.S. jobless figures brought the total of people filing for unemployment to 30 million in just six weeks. Other data showed consumer spending plunged a record 7.5% in March from the month before, a dire blow for an economy where such spending makes up 70% of the total.
“Maybe it was the whole monthend malaise, or maybe they just need to hear something new and impactful, and that we’re ultimately seeing buying fatigue,” Chris Weston of Pepperstone said in a commentary.
Promises from the Federal Reserve and other central banks to do whatever it takes to get economies through the coronavirus crisis have supported buying by investors betting that a recovery will come soon. Professional investors say that optimism may be premature.
The yield on the 10-year Treasury edged down to 0.61% from 0.63% late Thursday. It started the year close to 1.90%. Treasury yields tend to fall when investors are downgrading their expectations for the economy and inflation.
With world travelers still mostly grounded by pandemic precautions, each day brings fresh shocks from the crisis.
Budget airline Ryanair said Friday it plans to cut up to 3,000 jobs and close bases in Europe as part of a restructuring program that includes plans for unpaid leave and pay cuts of as much as 20%.
The budget airline says it will operate less than 1% of its flights from April to June and that passenger numbers will not return to 2019 levels “until summer 2022 at the earliest.’’
The airline group also says it is in “active negotiations” with Boeing to cut the number of planned aircraft deliveries over the next 24 months.
With travel nearly at a standstill, oil prices have remained volatile.
U.S. benchmark crude yoyo’d between gains and losses, shedding 12 cents to $18.72 per barrel in electronic trading on the New York Mercantile Exchange. It jumped $3.78 on Thursday to $18.84 per barrel.
Oil has recovered from the below zero level it hit on worries over collapsing demand and strained storage capacity. But it’s still way below the roughly $60 level where it started the year.
Brent crude, the international standard, gave up 27 cents to $26.21 per barrel.
In currency trading, the dollar fetched 106.79 Japanese yen, down from 107.13 yen on Thursday. The euro rose to $1.0975 from $1.0955.
Stocks headed broadly lower on Wall Street Friday after Amazon and other big companies reported disappointing results, the latest evidence of how the coronavirus pandemic is hobbling the economy and hurting corporate earnings.
A day after closing out its best month since 1987, the S&P 500 was down 2.7% and on track for its second straight weekly loss. The selling accelerated as the day went on, with energy stocks taking the biggest losses. Technology stocks and companies that rely on consumer spending accounted for a big slice of the decline.
Amazon sank 7% after it reported profit for the latest quarter that fell short of Wall Street’s forecasts. The retail giant also said it will spend billions of dollars this quarter to pay workers overtime, buy masks for them and make other investments. Its movements have outsized sway on the S&P 500 because it’s the third-largest company in the index. Amazon alone accounted for one-seventh of the S&P 500’s loss for the day.
“We all had these great expectations for Amazon,” said J.J. Kinahan, chief strategist with TD Ameritrade. “The stock ran up amazingly because we were expecting their earnings to be good.”
The Dow Jones Industrial Average was down 604 points, or 2.5%, at 23,737, as of 3:33 p.m. Eastern time, and the Nasdaq was down 3.1%.
Exxon Mobil fell 5.7% after it said it swung to a loss of $610 million last quarter. It had to write down the value of its inventories by $2.9 billion amid a collapse in energy prices as airplanes, automobiles and workplaces worldwide suddenly went idle in the spring.
Exxon Mobil helped drive energy stocks across the S&P 500 to a 5.8% loss, the largest among the 11 sectors that make up the index.
Wall Street has been bracing for a poor showing by companies this earnings season due to the economic shock from the coronavirus. Many companies have pulled their earnings guidance for the rest of the year, citing uncertainty about how much of an impact the outbreak will have on their business and the economy, which is now in a recession.
“There’s an expectation that we’ll have a very difficult second quarter for GDP and profits, and the third quarter will probably still be difficult,” said Jason Pride, chief investment officer of private wealth at Glenmede.
That has many analysts looking past the next few months and betting on a recovery by the end of this year or in 2021.
“But, that’s predicated on us not having a second wave of the outbreak,” Pride said.
Disappointing company results weren’t the only drag on stocks Friday. Shares of electric car and solar panel maker Tesla Inc. slid 9.4% after CEO Elon Musk tweeted that the price was too high. In a series of tweets just after 11 a.m., Musk said he was selling nearly all of his physical possessions and would not own a house. Then he wrote that “Tesla stock price is too high imo.” After that he tweeted that people should be given back their freedom, in another protest of government stay-home orders to slow the spread of coronavirus. Then he posted parts of the U.S. national anthem.