Spotlight: Global market rout ratchets up amid pandemic fears, recession anxieties
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E-mail Xinhua, March 13, 2020
by Xinhua writer Ma Qian
BEIJING, March 13 (Xinhua) -- The global financial market was spooked once again shortly after the world witnessed "bloodshed" in stocks and oil prices across major countries since "Black Monday," falling on track for its worst week on record, as panic over the novel coronavirus mounts and recession worries loom large.
U.S. President Donald Trump announced late Wednesday the U.S. would impose travel restrictions from European countries -- excluding the UK -- for 30 days, which will go into effect Friday at midnight.
On Thursday, World Health Organization (WHO) Director General Tedros Adhanom Ghebreyesus urged all countries to "double down" on efforts to fight the virus, after the organization characterized the COVID-19 outbreak as a "pandemic" the previous day.
STOCKS CONTINUES TO TANK WITH TRADE HALT
Consequently, Wall Street bore the brunt on Thursday, as the three major indexes sank into bear market territory, wrapping up the country's longest running of bull market in history for nearly 11 years.
A bear market refers to a period when stock indexes fall by 20 percent or more from recent highs. After Thursday's opening bell, the circuit breaker was switched on to halt trading for the second time in four days, as the benchmark S&P 500 plummeted more than 7 percent.
The U.S. stock market closed the day, its worst trading sessions since the 1987 market crash, with the Dow Jones Industrial Average erasing more than 2,300 points or about 10 percent, the S&P 500 losing 9.5 percent and Nasdaq Composite shrinking 9.4 percent.
The shockwaves also pummeled the already-panicked equity markets across Europe, Asia Pacific and Latin America, which have braced for the worst single-day decline in decades.
Across Europe, the pan-European STOXX 600 index wiped out over 11 percent on Thursday, after the European Central Bank stunned the market by deciding not to cut interest rates, despite its other fiscal stimulus measures to boost lending, largely denting market hopes.
In Britain, the blue-chip FTSE 100 index cratered nearly 11 percent on Thursday, marking its steepest daily fall since 1987.
Similarly in Japan, Tokyo's widely-watched Nikkei Stock Average slid more than 10 percent to break below the 17,000 threshold for the first time in over three years on Friday morning, marking its largest daily decline since April 1990.
Brazil's Stock Exchange in Sao Paulo tanked nearly 15 percent at one time on Thursday, its worst one-day fall in 21 years. The stock exchange suspended trading twice, as steep drops in value triggered the circuit breaker to temporarily halt operations.
This week, trading has been suspended four times. Brazil's stock exchange has not seen such a major loss in value since 1998.
RECESSION FEARS LOOM LARGE
The hefty losses in the global financial market have ramped up anxieties over a potential global recession, as major international institutions and investment banks scale down their expectations on this year's economic growth.
"Recession odds have materially increased," said Lisa Shalett, chief investment officer of Morgan Stanley, in a note earlier this week, adding that current concerns lie with a shock to both supply and demand.
"The longer consumers and corporate executives remain uncertain about the risks they face, the more likely they will curtail spending, creating a major headwind for economic growth," she noted.
Other economists have predicted more of a doom and gloom scenario.
"My view is that what is happening is that the coronavirus epidemic has burst the global equity and credit market bubbles. This is bound to deliver a severe blow to both the U.S. and global economies," Desmond Lachman, a resident fellow at the American Enterprise Institute, told Xinhua.
"Prior to the coronavirus scare, we had global equity valuations that were very high by historical standards and a global credit market that seriously mispriced risk," Lachman said.
The International Monetary Fund (IMF) held that how serious the global economic slowdown may turn out hinges on how the COVID-19 pandemic would spread and how governments respond accordingly.
"It's difficult to predict at this point," IMF spokesman Gerry Rice told a news briefing on Thursday. "It depends of course on the spread, the propagation of the outbreak. It depends on the measures taken to respond and how effective they are."
IMF Managing Director Kristalina Georgieva said last week that global growth would drop below the 2.9 percent rate the IMF previously predicted in 2019, as the coronavirus outbreak has caused "a shift to a more adverse scenario for the global economy."
FINANCIAL ASSISTANCE, HIGH ATTENTION
In the event of a serious downturn triggered by COVID-19, the IMF has made about 50 billion U.S. dollars available for low-income and emerging market countries that could potentially seek support.
The World Bank has also made available an initial package of up to 12 billion U.S. dollars "in immediate support" to fund needed countries to mitigate the health and economic impacts of the pandemic.
Yet Morgan Stanley's Shalett still sounded a positive note, saying the expected economic slowdown may not last into the second half of the year and global growth could recover alternatively.
"Disrupted supply chains would resume quickly if demand picks up. There are some positive signs: new coronavirus cases in China appear to be declining and global health organizations are working together better," she stressed.
Renowned Chinese respiratory specialist Zhong Nanshan said Thursday that if most countries acted like China, attaching national-level importance to response efforts, the global COVID-19 pandemic could be brought under control "by June."
"I know that some countries have done a good job and some countries have not. Some countries have reminded people to be wary of the virus and not to treat it as flu. Our estimate of global control by June was based on the positive measures taken by those countries," Zhong told a press conference in Guangzhou.
"But if the world fails to attach great importance to addressing the threat and infectiousness of the virus through interventions, this timeframe may be extended," he warned. Enditem
(Xinhua reporters Bruna Gama in San Paulo and Matthew Rusling in Washington also contributed to the story.)
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