Global stock markets fell again despite the announcement by central banks around the world of a concerted effort to mitigate the effects of the coronavirus.
The Dow Jones closed 12.9% lower after President Donald Trump said the economy “could” head into a recession.
London’s FTSE 100 finished down 4%, and the other major European markets recorded similar declines.
The US Federal Reserve lowered interest rates to almost zero on Sunday and launched a $ 700 billion stimulus package.
It was part of a coordinated work announced alongside the Eurozone, the United Kingdom, Japan, Canada and Switzerland.
However, investors fear that central banks will now have few options to deal with the impact of the epidemic.
The Bank of England new Governor, Andrew Bailey, has pledged to take “immediate action” again when necessary to stem the economy from the coronavirus epidemic.
David Madden, the market analyst at CMC Markets, said that if central bankers try to calm the markets, “in reality, it does the opposite.”
“The radical actions have sent an alarming message to traders, which is why they are blindly disposing of stocks.”
In New York, a sharp drop with the opening of the markets led to another automatic pause in trade, which aims to curb panic. Before last week, none of these stops, known as circuit breakers, had been used for more than two decades.
But the sale continued after a 15-minute hiatus, with the Dow Jones losing nearly 3,000 points or 12.9%, the worst percentage decline since 1987.
The Standard & Poor’s 500 indexes fell 11.9%, while the Nasdaq 500 fell 12.3%. The three indicators are now more than 25% below their peaks.
Travel businesses in London have experienced significant declines. The vacation company, Tui’s share, has dropped by more than 27% after announcing that it would “most” cease operations.
British Airways, which owns British Airways, fell more than 25% after announcing that it would reduce air capacity by at least 75% in April and May.
The FTSE 250 index, which includes several well-known companies focusing on the United Kingdom, fell 7.8%.
- New England Bank President vows to take immediate action
- The United States reduced its emergency rate and its massive recovery plan
- Airlines cut more flights with coronavirus infection
- PM urges industry to help make NHS fans
All the leading European stock market indices fell sharply, although they subsequently regained ground. The French Cac 40 fell by more than 5.7% and the German Dax by more than 5.3%.
Earlier in Asia, the Japanese Nikkei 225 closed down 2.5%, and the Shanghai Composite in China ended the day down 3.3%.
Oil prices, shaken by a price war between exporters, fell again. Brent crude oil fell more than 10% to less than $ 32 a barrel, while WTI fell more than 8% to less than $ 30 a barrel.
Does hysteria prevail over common sense? Maybe not
Just a few weeks ago, there was concern that factories that had shut down in China’s Hubei province would prevent global growth from slowing for a while. Then it became clear that economic suffering was probably more widespread.
Now, as tourism and leisure activities cease to function and threaten supply chains, a more extensive recession may be more likely. In other words, economic growth is going in the opposite direction for two consecutive quarters, which means emergency cash flow for some companies, potential business failures and high unemployment.
The challenge for policymakers is to stem this slowdown. On Sunday, the massive bragging of the Federal Reserve showed how central banks could get big. But interest rate cuts have limited utility; customers will not be tempted to go out and spend in Marseille or New York when the bars are closed and flights cancelled.
The markets are, therefore turning to governments for more targeted support and rescue programs. But even that will not wholly calm the nerves. When banks are implementing their workplace emergencies, what marketers want is a sign that the number of cases where the virus has peaked, and the recovery is on the right track.
The US central bank, the Federal Reserve, cut interest rates by 100 basis points to a target range of 0% to 0.25% on Sunday and said it would provide at least $ 700 billion. To support the markets in the coming weeks.
The move comes after local officials in the United States closed schools, restaurants and bars, sports tournaments cancelled tournaments, and retailers like Urban Outfitters, Nike and Gap announced the temporary closure of hundreds of stores.
“The virus is having a profound effect,” said Federal Reserve Chairman Jerome Powell after the announcement.
But stock market plunged as investors feared that the world’s major central banks would have little residual ammunition to cope with the effects of the coronavirus if the global economic climate continued to deteriorate.
“They [the Federal Reserve] withdrew all the weapons they had, and I think it might help at first, but I don’t think it goes much further as it is a developing problem. They consumed all their ammunition and us, “said Robert Pavlik, manager. This is due to the investment strategists of Slastonith Wealth, which are expected to sticks and stones.
Why should I care about the stock Market downturn?
The primary reaction of many people to “markets” is that they are not directly affected because they do not invest money.
However, millions of people who receive a pension – private or professional – will see their savings (in what is called a defined contribution pension) invest in pension plans. The performance of these investments influences the value of their savings bank.
Such significant increases or decreases can affect your pension, but the advice is to remember that pension savings, like any investment, is usually a long-term bet.
In addition to the Federal Reserve, five other central banks – the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Canada and the Swiss National Bank – announced measures to facilitate the introduction of dollars into their institution’s companies facing pressures in the credit markets.
The move is aimed at lower the prices of banks and companies paying the US dollar, which have risen in recent weeks.
Andrew sentence – a former member of the Bank of England’s monetary policy committee that sets interest rates – told the BBC today that banks are working to ensure sufficient credit flows.
“There have been critics of the financial crisis, that the central banks have not acted fast enough,” he said. “I see this as a partial precaution for central banks to show that they are doing what they can to keep the economy running.”
Sentance added that any further reduction in the UK base price, for example, 0.10%, would be “symbolic, as it would not have as great an impact on businesses or individuals”.
In other developments in stock market on Monday:
Tensions continued in other parts of the market, as they are generally considered to be less risky, with gold prices falling by more than 5% at one point.
Eas, The Bank of Japan, eased its monetary policy by committing to buy risky assets at a rate twice the current price. It announced a new lending program to provide one-year loans to financial institutions.
Australian stocks recorded their most significant daily drop, the ASX 200 benchmark falling 9.7%
The Reserve Bank of Australia has declared itself “ready” to inject more money into the country’s financial system
New Zealand’s central bank cut interest rates by 75 basis points as it prepared for a “big” blow to the economy.
Did US Maintain all lose in stock market in 2020?