BBC News: Global stock markets have sunk again despite central banks around the world announcing a coordinated effort to ease the effects of the coronavirus.
The Dow Jones index closed 12.9% down after President Donald Trump said the economy “may be” heading for recession.
London’s FTSE 100 ended 4% lower, and other major European markets saw similar slides.
On Sunday, the US Federal Reserve cut interest rates to almost zero and launched a $700 billion stimulus program.
It was part of coordinated action announced alongside the Eurozone, the UK, Japan, Canada, and Switzerland.
However, investors are worried that central banks now have few options left to combat the impact of the pandemic.
The new governor of the Bank of England, Andrew Bailey, has pledged to take “prompt action again” when necessary to stop the damage to the economy from the coronavirus pandemic.
David Madden, a market analyst at CMC Markets, said that while central bankers were trying to calm the markets, “in reality it is having the opposite effect.”
“The radical measures have sent out a very worrying message to dealers, and that is why they are blindly dumping stocks.”
In New York, steep falls as markets opened triggered another automatic halt to trading, which is meant to curb panic selling. Before last week, such halts, known as circuit breakers, had not been used in more than two decades.
But the sell-off continued after the 15-minute suspension, with the Dow losing nearly 3,000 points or 12.9%, its worst percentage drop since 1987.
The wider S&P 500 dropped 11.9%, while Nasdaq dropped 12.3%. All three indexes are now down more than 25% from their highs.
In London, firms in the travel sector saw big falls. Shares in holiday firm Tui sank more than 27% after it said it would suspend the “majority” of its operations. BA-owner IAG fell more than 25% after it said it would cut its flight capacity by at least 75% in April and May.
The FTSE 250, which includes a number of well-known UK-focused companies, ended down about 7.8%.
All the main European share indexes fell sharply, though they later regained some ground. France’s Cac 40 index fell more than 5.7% and Germany’s Dax dropped more than 5.3%.
Earlier in Asia, Japan’s benchmark Nikkei 225 closed down 2.5% and the Shanghai Composite in China ended the day 3.3% lower.
Oil prices, which have been shaken by a price war between exporters, fell again. Brent crude dropped by more than 10% to less than $32 a barrel while West Texas International crude fell more than 8% to less than $30 a barrel.
Only a few weeks ago, the fear was that factories grinding to a halt in China’s Hubei province could cause global growth to stumble briefly. Then it became clear that the economic pain was likely to be much more extensive.
Now, with tourism and leisure activities grinding to a halt and supply chains threatened, a widespread recession may be more likely than not. In other words, economic growth going into reverse for two consecutive quarters, which would mean cash flow emergencies for some businesses, possible corporate failures and rising unemployment.
The challenge for policymakers is to stop that downturn. Sunday’s extravaganza by the Fed showed how central banks can go big. But interest rate cuts are of limited use; they won’t tempt customers to go out and spend in Marseille or New York when the bars are closed, and flights cancelled.
So the markets are looking to governments for more targeted support and bailout packages. But even that won’t calm nerves altogether. As banks enact their own workplace contingencies, what traders really want is a sign that the virus caseload has peaked, and then that the financial convalescence is on track.
Our Comment:
Revelation warns of financial crises in the last days. Are we seeing a foretaste of events to come?
Prophetic Link:
“And the merchants of the earth shall weep and mourn over her; for no man buyeth their merchandise any more…” Rev. 18:11.