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The rout in global stocks deepened after the US and European policy responses to the worsening spread of the coronavirus rattled investors pining for more. Treasuries and haven currencies rallied.
US equities plunged 6.5% at the open, threatening to trigger a NYSE circuit breaker that halts trading for 15 minutes if losses reach 7%. European stocks tumbled more than 8%. The 10-year Treasury yield slid to 0.65%.
US President Donald Trump’s travel ban and tepid fiscal measures sparked the latest leg down in risk assets, while the European Central Bank failed to stem the rout after it left rates unchanged, though it temporarily increased its QE program and took steps to boost liquidity.
On another bruising day across markets:
- The S&P 500 headed for a bear market, with losses from its February closing record past 24%. The Dow Jones Industrial Average sank deeper into bear territory after its record bull run ended Wednesday.
- The MSCI All-Country World Index extended losses to trade more than 20% below last month’s peak, putting it in on track for the same distinction.
- The Stoxx Europe 600 tumbled almost 8%, with most industry sectors down 5% or more and trading volumes more than double the 100-day average. The cost of insuring debt issued by Europe’s investment grade companies surged to the highest since 2016.
- Japanese stocks closed more than 4% lower even after another liquidity pledge from the country’s central bank. Australian shares were among the worst performing worldwide, sinking deeper into a bear market despite a stimulus plan there. India’s benchmark fell more than 8%.
- Treasury yields resumed their retreat, sliding by almost 20 basis points. Oil extended losses by more than 5%. Bitcoin slumped.
Trump unveiled steps including lending aid for small businesses and asked Congress to pass undefined payroll-tax relief, but his Oval Office address gave the market little confidence that the U.S. is tightening its grip on the virus or its economic impact. The World Health Organization earlier called the outbreak a pandemic and other countries, such as the U.K., have taken more extreme measures to try to blunt the threat to growth.
"Market moves suggest monetary stimulus has reached its limits,” said Lucas Bouwhuis, a portfolio manager at Achmea Investment. “Most of the stimulus needs to come from the fiscal side and we are just not seeing enough of that yet."
Meanwhile, signs that companies in the hardest-hit industries were drawing down credit lines to battle the effects of the virus on their businesses added to anxiety.
“The market will need much more to get its confidence back,” said Mohit Kumar, managing director at Jefferies International Ltd. “The economic slowdown is because consumers won’t spend as they don’t go out or travel -- you can’t make them spend by giving cheaper money. What you need is fiscal stimulus.”
These are the main moves in markets:
Stocks
- Futures on the S&P 500 Index declined 5.1% as of 9:01 a.m. New York time.
- The Stoxx Europe 600 Index fell 7.3%.
- The MSCI Asia Pacific Index dipped 4.4%.
- The MSCI Emerging Market Index dipped 4.8%.
Currencies
- The Bloomberg Dollar Spot Index gained 0.6%.
- The euro was little changed at $1.1268.
- The British pound sank 1% to $1.2691.
- The onshore yuan weakened 0.8% to 7.016 per dollar.
- The Japanese yen strengthened 0.6% to 103.89 per dollar.
Bonds
- The yield on 10-year Treasuries sank 20 basis points to 0.67%.
- The yield on two-year Treasuries fell 13 basis points to 0.39%.
- Germany’s 10-year yield dipped three basis points to -0.77%.
- Britain’s 10-year yield declined six basis points to 0.234%.
- Japan’s 10-year yield climbed one basis point to -0.057%.
Commodities
- West Texas Intermediate crude declined 6.3% to $30.89 a barrel.
- Brent crude dipped 6.2% to $33.57 a barrel.
- Gold weakened 1.2% to $1,614.73 an ounce.
--With assistance from Sophie Caronello, Min Jeong Lee, Adam Haigh and Anchalee Worrachate.
