Markets reeling as concerns of recession grow
THE coronavirus threat led the European stocks index to suffer its biggest loss ever yesterday.
The Stoxx Europe 600 index, which measures major stocks across the region, fell 11.5%, eclipsing the 8.5% drop during the 1987 stock market crash.
Britain’s FTSE 100 fell 10.9%, its worst loss since 1987. Germany’s DAX plunged 12.2% – more than it lost after the 9/11 attacks.
Investors worried about a US travel ban that covers much of Europe and could signal tougher government limits on business.
Some analysts also noted how European Central Bank president Christine Lagarde underscored how it was mainly up to governments, not central banks, to help economies recover.
The emergency also sent US stocks to their worst losses since the 1987 crash. The plunge extended a sell-off that has wiped out most of Wall Street’s gains since Mr Trump’s election.
The heavy losses came amid a cascade of cancellations and shutdowns across the globe – including Mr Trump’s suspension of most travel to the US from Europe – and rising worries that economies won’t recover from the coronavirus any time soon.
‘The news just continues to get worse, and the travel ban puts an exclamation point on the weakness we’re going to see in global GDP and, in turn, the US,’ said Liz Ann Sonders, chief investment strategist at Charles Schwab. ‘We’re starting to get a sense of how dire the impact on the economy is going to be. Each day the news doesn’t get better, it gets worse.’
Stocks fell so fast on Wall Street at the opening bell that they triggered an automatic, 15-minute trading halt for the second time this week.
The Dow briefly turned upward and halved its losses at one point in the afternoon after the US Federal Reserve announced it would ease ‘highly unusual disruptions’ in the Treasury market. But the burst of momentum faded.
Last month, the Dow was boasting a nearly 50% gain since Mr Trump took office in January 2017. Yesterday, the Dow finished down more than 20% from its alltime high, set just last month.
The combined health crisis and fall on Wall Street heightened fears of a recession.
‘This is bad. The worst and fastest stock market correction in our career,’ Chris Rupkey, chief financial economist at MUFG Union, said in a research note overnight. ‘The economy is doomed to recession if the country stops working and takes the next 30 days off. The stock market knows it.’
The coronavirus has infected around 128,000 people worldwide and killed over 4,700. The death toll in the US climbed to 39, with over 1,300 infections.
For most people, the virus causes mild symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illnesses, including pneumonia.
The European Central Bank is now deploying new stimulus measures to cushion the economic pain inflicted by the outbreak. The ECB decided to buy up to €120billion more in bonds this year. It comes on top of purchases worth €20billion a month it is already carrying out.