World markets tumble as recession fears eclipse stimulus

Global stock and oil markets plunged on Wednesday, as vast stimulus measures failed to offset heightened concerns that the worsening coronavirus outbreak will tip the world into a deep downturn, dealers said.

On Wall Street, the Dow Jones Industrial Average was hit by another loss of over 1,000 points to fall below the 20,000-point level despite authorities in the US and elsewhere moving forward with more measures to prop up the economy.

Trading was suspended just before 17.00 GMT due to the steep losses.

In European trading, both Paris and Frankfurt slumped more than 5.0 percent, while London gave up 4.0 percent, following Asian markets lower.

World oil prices spiralled lower on energy demand woes, with New York’s WTI crude plunging almost 18 percent and Brent tumbling nearly 12 percent to prices unseen in nearly two decades.

WTI hit a low of $21.73 per barrel and Brent $25.23 during the trading session, putting them down more than 60 percent from peaks they hit at the beginning of January.

“It is unclear what will calm investors’ concerns, if there is anything at all,” said market analyst Connor Campbell at Spreadex.

“Huge stimulus packages have already been announced, and no doubt there will be plenty more to come,” he added.

Washington led the charge on Tuesday, with Treasury Secretary Steven Mnuchin saying officials were drawing up a package that could surpass $1 trillion, on top of $300 billion in deferred tax payments, putting it among the largest federal emergency plans ever and surpassing assistance during the 2008 global financial crisis.

The measures would include cash payments to struggling families, and the US central bank also unveiled a new credit facility to help households and business stay afloat.

British finance chief Rishi Sunak unveiled an “unprecedented package” of government loans worth £330 billion ($400 billion), while France and Spain announced tens of billions of euros (dollars) in aid.

Canada came up with an aid package of Can$27 billion (US$19 billion) plus more in tax deferrals, and has also cut interest rates.

Yet most market commentators agree that the virus-wracked world economy will likely plunge into recession — which means a minimum of two successive quarters of economic contraction.

“From what we see from the markets’ reaction, massive monetary and fiscal measures deployed are not thought to be enough to prevent economies from plunging into recession,” Swissquote Bank analyst Ipek Ozkardeskaya told AFP.

“Every business and household is expecting governments to replace the coronavirus-led losses, which is simply not possible.

“Hence, there is already a massive shock in activity and demand, which almost guarantees a worldwide recession regardless of the measures taken by central banks and governments,” Ozkardeskaya added.

The moves by governments followed central bank interest rate cuts and pledges to make cash available to stop financial markets from jamming up.

The dollar meanwhile rose across the board, including versus the Japanese yen, which is usually seen as a safe haven investment in times of economic turbulence.

“It seems as if the greenback is acting as a safe haven currency,” said analyst David Madden at CMC Markets UK. “The Fed have taken their tough medicine by slashing rates to almost zero, so the central bank is likely to sit on its hands for some time now.”

Sterling hit its lowest level since 1985 against the dollar after trading on equities markets closed for the day, crashing below $1.15 briefly.

In Asian equities trading, Tokyo stocks ended down 1.7 percent, while Sydney plunged more than six percent, Hong Kong lost more than four percent, and Shanghai was 1.8 percent lower.

Key figures around 16.30 GMT

London – FTSE 100: DOWN 4.1 percent at 5,080.58 points (close)

Frankfurt – DAX 30: DOWN 5.6 percent at 8,441.71 (close)

Paris – CAC 40: DOWN 5.9 percent at 3,754.84 (close)

Madrid – IBEX 35: DOWN 3.4 percent at 6,274.80 (close)

Milan – FTSE MIB: DOWN 1.3 percent at 15,120.48 (close)

EURO STOXX 50: DOWN 5.5 percent at 2,391.41

New York – Dow: DOWN 6.7 percent at 19,716.40

Tokyo – Nikkei 225: DOWN 1.7 percent at 16,726.55 (close)

Hong Kong – Hang Seng: DOWN 4.2 percent at 22,291.82 (close)

Shanghai – Composite: DOWN 1.8 percent at 2,728.76 (close)

Brent North Sea crude: DOWN 11.7 percent at $25.36 per barrel

West Texas Intermediate: DOWN 17.9 percent at $22.14

Dollar/yen: UP at 108.18 yen from 105.25 yen at 2100 GMT

Euro/dollar: DOWN at $1.0848 from $1.1016

Pound/dollar: DOWN at $1.1743 from $1.2079

Euro/pound: UP at 92.35 pence from 91.21 pence.

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