Global markets enter correction territory

US STOCKS SUFFER STEEPEST WEEKLY FALL SINCE 2008

Equity markets around the world slumped yesterday, with main indexes in Europe and Wall Street slipping into correction territory as the rapid spread of the coronavirus outside China intensified fears about the hit to economic growth and corporate earnings.

The sharpest moves across markets were partly reversed in afternoon trading in New York, but risky assets remained in the red.

The S&P 500 and Nasdaq are now more than 10 per cent below their intraday record highs hit on February 19, while the Dow Jones Industrials is 10 per cent off its February 12 peak. European stocks slumped 4 per cent. The indexes were set for their steepest weekly pullback since the global financial crisis.

Investors typically consider a correction in a security or index to be a drop of 10 per cent or more from its recent peak.

The Dow Jones Industrial Average fell 297.03 points, or 1.1 per cent, to 26,660.56, the S&P 500 lost 30.99 points, or 0.99 per cent, to 3,085.4 and the Nasdaq Composite dropped 109.23 points, or 1.22 per cent, to 8,871.55. The pan-European STOXX 600 index lost 3.75 per cent, for a more than 10 per cent drop from its record closing high set last week.

MSCI’s gauge of stocks across the globe shed 1.31 per cent.

Emerging market stocks lost 0.57 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.05 per cent higher, while Japan’s Nikkei lost 2.13 per cent to a 4-1/2-month low.

The S&P index recorded four new 52-week highs and 90 new lows, while the Nasdaq recorded 15 new highs and 361 new lows.

European stocks were poised to record their worst single-day performance since the Brexit referendum in 2016 and their sixth day of declines in the past seven.

The pan-European STOXX 600 index has fallen more than 10 per cent over the past week, a sudden plunge from its record high on February 19.

“From the unshakeable optimism seen at the beginning of the year, investors have done a complete U-turn switching from excessive optimism to outright pessimism in less than a week,” Michael Hewson, chief market analyst at CMC Markets UK, said.

In the red

In yesterday’s sell-off, more than 97 per cent of the pan-European STOXX 600 index’s constituents were trading in the red with travel stocks bearing the brunt. British Airways-owner IAG, easyJet and Air France fell 10 per cent-11 per cent.

Bank of America slashed its global growth forecast to the lowest level since the peak of the financial crisis.

Industry analysts and economists continued to sound the alarm as they assessed the impact of the coronavirus, with Goldman Sachs saying US firms will generate no earnings growth in 2020. Meanwhile, Eurozone money markets have started to fully price in a December European Central Bank interest rate cut as expectations for more stimulus ramp up.