Shares slide again as pandemic declared
STOCK markets were plunged back into turmoil as the coronavirus outbreak was declared a pandemic and traders shrugged off emergency measures to prop up economies.
The FTSE 100 fell to a new four-year low despite the Bank of England cutting interest rates from 0.75pc to 0.25pc and Chancellor Rishi Sunak unveiling a £30bn plan to stimulate the economy.
Sunak said the economy faced a ‘significant impact’ from the virus, even if it was likely to be temporary. And the Office for Budget Responsibility warned: ‘A recession this year is quite possible if the coronavirus causes widespread economic disruption.’
Italy yesterday unveiled a £22bn plan to cushion the economic impact – up from estimates that it would need £6.6bn. Wall Street crashed after the World Health Organisation (WHO) said the outbreak was a pandemic, meaning it is a disease that is spreading in multiple countries.
WHO director Dr Tedros Adhanom Ghebreyesus said the organisation is deeply concerned by ‘alarming levels of inaction’.
More than 1,500 points were wiped off the Dow, which fell more than 6pc, while the S&P 500 and the Nasdaq each dipped by more than 5pc. Earlier, Goldman Sachs spooked the market with a prediction that the S&P will fall by a further 15pc.
The falls continued a roller-coaster week that saw stocks worldwide plunge on Monday, triggered by Saudi Arabia and Russia starting an oil price war, which sent prices plunging by more than a third. Oil dropped by 3.9pc to around $36 a barrel yesterday after Saudi Arabia’s state oil company Aramco said it had been ordered to raise its production capacity by 1m barrels per day.
This risks flooding the market – and pummelling prices further – at a time when demand is falling because of transport lockdowns. Traders also fretted about the US government response to the outbreak.
President Donald Trump’s administration has failed to provide clear details about ‘very dramatic’ measures it promised on Monday to protect businesses and even hourly wage earners ‘so that they can be in a position where they’re not going to ever miss a paycheck’.
Chris Beauchamp, analyst at online trading platform IG, said: ‘US markets have begun the session with more big losses, repeating the pattern of the week so far.
‘For the most part, bounces are selling opportunities, and this will remain the case until the US government decides to embark on a huge stimulus programme that will make Rishi Sunak’s £30bn effort seem like a popgun by comparison.
‘But since there is no sign of such a stimulus yet, investors continue to fret about the spread of the coronavirus in the US, which seems woefully unprepared.’
There were more than 1,000 cases of the Covid-19 virus in the US last night, with 32 deaths.
Last night the US central bank, the Federal Reserve, ramped up the amount of money it was injecting into short-term borrowing markets, to minimise volatility.