NEW YORK: Global stocks slumped to mark the largest weekly drop since the 2008 global financial crisis over fears the coronavirus could wreak havoc on the world economy.
Crude oil prices tumbled as well and analysts said that central banks, especially the US Federal Reserve, might have to shift into crisis-resolution mode with urgent interest rate cuts. But James Bullard, head of the Saint Louis Fed, warned that emergency rate cuts were “not the baseline at this time” for the central bank’s policymakers.
And “beyond helping to alleviate the current stock market collapse, there is little any central bank could do to alleviate the potential repercussions of a global pandemic,” noted Joshua Mahony, senior market analyst at IG. Frankfurt headed the losses in Europe, shedding almost 3.9 percent as the market closed.
Leading European stock markets have lost more than 10pc in just one week, with London’s FTSE 100, which fell by 3.4pc on Friday, giving up 11.3pc. But in New York, the Dow Jones index was 1.1pc lower in midday trades, while the broader S&P 500 was off by 0.7pc, coming back from steeper drops at the open.
On Thursday, the Dow suffered its biggest points loss on record, shedding almost 1,200 points as its 4.4pc drop marked the steepest decline in two years.
The markets in Shanghai, Sydney and Tokyo all closed down 3.0pc on Friday, while Jakarta shed more than four per cent. The VIX “fear” index — which measures market volatility — is now at its highest level since the European debt crisis erupted in 2011.
“The panic mode is full on,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“The coronavirus outbreak has certainly hit businesses, and it might have a longer-than-expected negative impact on company earnings and global growth,” she added.
Meanwhile, the Japanese yen continued to benefit from its status as a haven investment in times of economic uncertainty, making solid gains against the dollar. Yields on 10-year US Treasuries were at an all-time low around 1.17pc.
Concern that global crude demand will crash meanwhile sent oil prices down again, by 3.1pc for Brent crude in London and by 4.6pc for US benchmark WTI crude, though they too appeared to be staging a late rally, of sorts. “Another day, another sell-off,” remarked analyst Stephen Brennock at energy consultancy PVM Associates.
“Risk assets took a significant step lower… as market players continued to squirm with unease over the growing coronavirus crisis.” In addition to central banks, governments also faced pressure to provide support. French Economy and Finance Minister Bruno Le Maire said the virus would be considered “a case of force majeure for companies,” meaning they would not be penalised if they failed to meet deadlines on public contracts.
The virus has now proliferated worldwide, emerging in every continent except Antarctica, and prompting governments and businesses to curb travel and public gatherings.
The Geneva International Motor Show was the latest major event to be cancelled after Switzerland banned large gatherings.
The virus has killed more than 2,800 people and infected more than 83,800 since late December.
