Global markets extend slump as coronavirus crisis deepens

Stock markets and oil prices collapsed on Friday as investors panicked over the devastating damage of the coronvavirus to global economic growth, dealers said.

Haven investments gold and the yen surged as the World Health Organization (WHO) warned that the epidemic must be taken seriously.

In afternoon trading, the Paris stock market fell by 4.3 per cent, Frankfurt dived 4.0 per cent, London shed 3.8 per cent and Milan tumbled 3.8 per cent in a fierce global markets selloff that began about two weeks ago.

On the other side of the Atlantic, US stock markets tanked and the Dow Jones Industrials shed more than 800 points on Friday, as the global tally of coronavirus infections surpassed 100,000 and jittery investors took cover in the perceived safety of bonds and gold.

The outbreak has crippled supply chains and prompted a sharp cut to global economic growth forecasts for 2020.

Yields on long-dated US Treasury notes hit all-time lows, wiping out the dollar’s single greatest attraction for investors - higher interest rates.

That pressured rate-sensitive bank stocks, with the S&P financial index nursing some of the biggest losses among the major sub-sectors. The banking sub-index was down 4.1%, bringing its total decline for the week to over 7%.

Starbucks Corp fell 4% after signaling a business hit due to fewer customers at its Chinese stores, while Costco Wholesale Corp was off 2% as it said it was struggling to keep up with demand for essentials, including disinfectants.

Despite the Federal Reserve’s attempt to shore up financial markets by slashing interest rates, Wall Street’s fear gauge marked its sharpest ever increase this quarter and the benchmark S&P 500 looked set to close out the week over 13% below its record close on Feb. 19.

On Friday, investors also looked past data showing a robust pace of hiring in February, underscoring the panic around the potential end of the longest US economic expansion on record.

At 10:18am, the Dow Jones Industrial Average was down 686.74 points, or 2.63%, at 25,434.54, while the S&P 500 was down 82.16 points, or 2.72%, at 2,941.78. The Nasdaq Composite was down 211.56 points, or 2.42%, at 8,527.04.

All 11 S&P sectors were trading lower, led by a 5.2% drop in energy stocks, which tracked a slump in oil prices.

Oil prices tanked more than 7% on Friday to their lowest levels since mid-2017 after Reuters reported that Russia balked at Opec’s proposed steep production cuts to stabilise prices.

A Russian high-level source told Reuters that Moscow would not back a call for extra reductions in oil output and would agree only to an extension of existing cuts by the Organization of the Petroleum Exporting Countries and its allies, a group known as Opec+.

Brent futures fell $3.71, or 7.4%, to $46.31 a barrel by 10:23am. US West Texas Intermediate (WTI) crude fell $3.41, or 7.4%, to $42.49.

Those prices were the lowest for Brent since July 2017 and for WTI since June 2017. Opec is pushing for an additional 1.5 million barrels per day (bpd) of cuts until the end of 2020.

Sources at the Organization of the Petroleum Exporting Countries (Opec) confirmed Russia’s position and a formal Opec+ meeting was under way after hours of delay.

An Opec+ delegate said there were “positive signs” after a separate, earlier Opec+ meeting had finished.

While governments and central banks have unleashed or prepared to roll out stimulus measures, the rapid spread of the disease and rising death toll are putting a strain on economies and stoking concerns of a worldwide recession.

The US Federal Reserve sprang a surprise half-point interest rate cut on Tuesday in an attempt to stem devastating fallout.

But as coronavirus continues its rapid spread  investors are fleeing risk assets such as stocks for financial havens.

“With the economic impact of coronavirus large and rising, policymakers in advanced economies are being forced to react,” said economist Adam Slater at research group Oxford Economics.

“But conventional monetary and fiscal options like the US Federal Reserve’s recent emergency rate cut, may not be enough.”

US President Donald Trump called off a visit to the Centers for Disease Control and Prevention in Atlanta on Friday, saying he did not want to “interfere” as the agency races to stem the coronavirus that has infected more than 100,000 people globally.

Trump canceled his plans to travel to the headquarters to the main US agency fighting the outbreak before signing a bill allocating $8.3 billion to stop the virus from spreading. The bill breezed through the Senate with a passing vote of 96-1 on Thursday.

WHO chief Tedros Adhanom Ghebreyesus, meanwhile, warned that “this is not a drill” as outbreaks surged in Europe and the United States, where medical workers warned of a a “disturbing” lack of hospital preparedness.

With dealers flocking to safety and yields on US Treasuries at record lows, gold has rocketed more than five per cent this week to sit at more than seven-year highs.

Agencies