European shares slump by record 11.5% after ECB and Trump response to virus

Coronavirus: Almost €35 billion wiped off value of Irish market in less than three weeks

The closing numbers are displayed after the closing bell of the Dow Industrial Average at the New York Stock Exchange on Thursday. Photograph: Bryan R Smith/AFP

The closing numbers are displayed after the closing bell of the Dow Industrial Average at the New York Stock Exchange on Thursday. Photograph: Bryan R Smith/AFP

 

European shares succumbed to their biggest-ever slump and Dublin’s Iseq plunged the most since the Brexit referendum as investors baulked at US and European attempts to deal with the impact of the rapid spread of Covid-19.

Both the FTSE 100 in London and New York’s Dow Jones Industrial Average suffered their worst percentage drop since 1987’s Black Monday sell-off, with the Dow down 9.99 per cent at the closing bell and London’s blue-chip index ending almost 10.9 per cent lower.

US president Donald Trump’s move to suspend travel from Europe, aside from Ireland and the UK, sent global markets plunging from the outset of trading on Thursday.

The European Central Bank’s (ECB) failure to lower rates – even though it has limited room for manoeuvre – also rattled investors.

“Ultimately, the measures announced today disappointed market participants,” said Cian Pierce, a money market trader with Bank of Ireland. “The market truly expected the ECB to throw everything they had in attempt to soften the blow Covid-19 would have on economic activity in Europe.”

The pan-European Stoxx 600 index closed the session down 11.5 per cent, the most on record.

Ireland’s Iseq declined by 9.9 per cent to a five-year low of 5,125.94, as investors also weighed plans announced by Taoiseach Leo Varadkar to close schools, colleges and cultural facilities to try to slow the spread of coronavirus.

Irish shares have spiralled 29.2 per cent lower in less than three weeks – wiping €34.9 billion off the value of Dublin-listed stocks. Bank of Ireland lost 15.5 per cent on Thursday, while Dalata Hotel Group plunged 14.9 per cent and CRH declined by 12.7 per cent.

Wall Street

Meanwhile, the S&P 500 index on Wall Street dropped 7 per cent at the start of trading on Wall Street, triggering a circuit breaker that resulted in trading being halted for 15 minutes to give nervous investors a chance to collect themselves.

The benchmark US index subsequently fell as much as 9.5 per cent, pushing it into a bear market – meaning it has dropped more than 20 per cent since its most recent high – with an attempt at a rally after the Federal Reserve said it would inject trillions of dollars into the financial system proving short lived.

The global equities sell-off so far this week, as confirmed Covid-19 cases approached 125,000 globally and the death toll exceeded 4,600, has come as investors brace themselves for a global recession and a severe credit crunch.

Meanwhile, the Government sold €1 billion of bonds that are due to mature in 2029 in a scheduled auction on Thursday morning. The debt was priced to carry a market interest rate – or yield – of minus 0.156 per cent.

It brings to €5 billion the amount the State has raised on the long-term bond markets so far this year, half of the minimum figure in the €10 billion to €14 billion fundraising range that the National Treasury Management Agency had set for 2020.

The money was earmarked to fund future bond redemptions. That was before the Government announced a €3.1 billion package earlier this week to help the Republic deal with impact of Covid-19.

Economists now expect the Government to dip into an unplanned budget deficit this year, accelerated by a drop in tax income as the coronavirus hits the economy.