Coronavirus panic clears $ 6 billion of world stocks this week

LONDON (Reuters) – Coronavirus panic caused global stock markets to fall again on Friday, leading them to their worst weekly decline since the 2008 global financial crisis, with nearly $ 6 billion removed from their market value So far this week.

FILE PHOTO: The offices of the London Stock Exchange Group are seen in the city of London, Great Britain, on December 29, 2017. REUTERS / Toby Melville / File Photo

The defeat showed no signs of slowing down, as Europe’s main markets fell 3-5% and the ongoing immersion for security sent US government bond yields. UU., Widely considered as the safest asset in the world, to new historical lows. [GVD/EUR]

Hopes that the epidemic that began in China would end in months and that economic activity would quickly return to normal have vanished this week as the number of international cases skyrocketed.

The stakes now are that the Federal Reserve will reduce US interest rates as soon as next month and that other major central banks will continue to try to help economies overcome problems and avoid a global recession.

“The volatility is not as surprising as the fact that it took so long to lift the head. However, recent changes indicate that the complacency that seems to have settled in the markets during the early stages of the outbreak has been evicted,” said Paras Anand , CIO, Asia Pacific of Fidelity International.

Interruptions in international travel and supply chains, the closure of schools and the cancellation of important events have blackened the prospects of a world economy that was already struggling with the consequences of the US-China trade war.

The MSCI global index for all countries, which tracks almost 50 countries, fell more than 1% ahead of US trade. UU. And almost 10% during the week, the worst since October 2008.

Wall Street shares fell 4.4% on Thursday alone, their biggest drop since August 2011. Futures pointed to a modest 1% drop later, but the S&P 500 has lost 12% since it hit a high historical only nine days ago, putting it that way. called correction territory. [.N]

European airlines and travel reservations have fallen 18% in their worst week since the attacks of September 11, 2001 in the United States. [.EU]. The CBOE volatility index, often called the “fear index,” rose to 47, the highest in approximately two years, well above the 11-20 range of recent months.

The index, which measures the expected changes in US stocks. UU. In the next 30 days, it generally shoots at around 50 when the sale in the bear market reaches its highest level, and approached almost 90 during the financial crisis of 2008-09.

(Chart: Coronacrash removes $ 5 billion from world stocks, here)

PANDEMIC WARNING

In Asia, the regional MSCI index, excluding Japan, showed 2.6%. Japan’s Nikkei fell 3.7% due to growing fears that the Tokyo Olympics from July to August may be suspended due to the coronavirus.

“The coronavirus now looks like a pandemic. Markets can face even if there is a great risk as long as we can see the end of the tunnel, ”said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“But for now, nobody can say how long this will last and how serious it will be.”

The director general of the World Health Organization, Tedros Adhanom Ghebreyesus, said the virus could become a pandemic as the outbreak spreads to major developed economies, such as Germany and France.

Around 10 countries have reported their first virus cases in the last 24 hours, including Nigeria, the largest economy in Africa.

The global defeat hit the actions of mainland China, which have been relatively well supported this month, as new cases of coronaviruses in the country fell and Beijing distributed measures to underpin economic growth.

The CSI300 index of Shanghai and Shenzhen shares fell 3.5%, to bring their weekly loss to 5% and the worst since April.

Oil prices languished at their lowest level in more than a year, having fallen 12% this week, the worst since 2016, while all major industrial metals have fallen between 3% and 6%. [MET/L][O/R]

The attractiveness of guaranteed income led to the recovery of high-grade bonds. US yields UU., Which move inversely to the price, fell, with the yield of the 10-year reference note reaching a record low of 1.1550% in frantic European trade. The last time was 1.1847%.

That is well below the three-month bill yield of 1.43%, deepening the so-called return of the yield curve. Historically, an inverted yield curve is one of the most reliable leading indicators of a recession in the United States.

Expectations that the Fed will reduce interest rates to cushion the coup are rising in the money markets. Analysts say future Fed funds Now they are priced at around 75% chance of a 25 basis point cut at the central bank meeting March 17-18.

The European Central Bank historically lags behind the Fed, but now it is cut by another 10 basis points in June.

(Graphic: Coronavirus blocks world markets, here)

Additional reports of Hideyuki Sano in Tokyo; Kirsten Donovan and Catherine Evans edition

Our Standards:The principles of trust of Thomson Reuters.

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