Global stocks have tumbled in another day of hectic trading after the US suspended travel from Europe and the coronavirus outbreak was declared a pandemic.
Bourses across Europe dived more than 5 per cent in morning dealings on Thursday after a drop of 4 per cent for MSCI’s broad index of Asia-Pacific equities. S&P 500 futures slid 5 per cent, the maximum allowed outside normal trading hours. A similar situation played-out on Monday - the S&P 500 tumbled 7 per cent at the opening bell, triggering a marketwide trading curb. The Irish index fell more than 6 per cent over the morning.
Thursday’s fall signals Wall Street’s benchmark barometer is poised to sink into a bear market after the open, having plummeted a fifth from its February record high.
The latest bout of market tumult came after President Donald Trump announced the travel ban in a televised address late on Wednesday after the World Health Organization said the crisis was now a "pandemic". The number of cases of infected patients in the US has risen to 1,281. Mr Trump said the new travel restrictions, which exclude the UK, would take effect from Friday.
In Europe, travel and leisure stocks came under acute pressure. The Europe-wide index tracking the sector was down 9 per cent, leaving it off more than a third for 2020. British Airways owner IAG was down 9.5 per cent, Air France-KLM tumbled 9 per cent and Lufthansa was off 10 per cent.
“Stocks are cratering on the president’s remarks from the White House,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “Stock markets around the world are in freefall as the spread of this deadly pandemic virus has the potential to slow the global economy to a crawl.”
The corporate fallout of the viral outbreak deepened on Thursday. Cineworld, the world’s second-biggest cinema chain, warned that in a worst-case scenario coronavirus disruption could cause it to be unable to pay its debts and call into question its ability to continue trading.
In a sign of the velocity of this month’s tumble, Europe’s Stoxx 600 has shed 16 per cent of its value this month, leaving it on track for the heaviest fall since the 1987 Black Monday crash.
“Although we have seen some stimulus measures from policymakers, it is unclear if it will prove comprehensive enough to mitigate the economic damage arising from coronavirus containment measures,” said Mark Haefele, chief investment officer at UBS Wealth Management.
Investors once again sought shelter in US government debt. The 10-year US Treasury yield was down 13 basis points on Thursday to 0.69 per cent, pointing to a strong rally in price. The yield still remains well above the low struck on Monday of 0.32 per cent.
Oil prices, which crashed at the start of this week on the prospect of a price war between Saudi Arabia and Russia, fell on the expectation the ban would mean more pain for the travel industry. International benchmark Brent crude was down 7 per cent at $33.20 a barrel, while US marker West Texas Intermediate fell 6 per cent to $30.95.
Mr Trump’s comments also caused sharp gains for Japan’s yen, which firmed as much as 1.4 per cent after the president’s announcement and is now trading near ¥104 per dollar. The yen, often viewed as a haven during times of stress, has surged in recent days. Dealers have speculated that Japanese authorities may engage in forms of stealth intervention to soften any move to ¥100 per greenback.
The Topix index, which closed 4.1 per cent lower on Thursday, is down by almost a quarter from its recent peak on February 6, putting the benchmark on track for its worst year since the 2008 global financial crisis.
Equities sold off across the Asia-Pacific region with China’s benchmark CSI 300 index of Shanghai- and Shenzhen-listed stocks finishing down 1.9 per cent and Hong Kong‘s Hang Seng falling 3.7 per cent. In Sydney the S&P/ASX 200 index closed down 7.4 per cent. – Copyright The Financial Times Limited 2020