World leaders rush in to shore up panic-hit financial system

World finance leaders tried to lift confidence with emergency measures to pour cash into panic-stricken markets on Thursday, as investors everywhere dumped assets, switching to dollars amid the escalating coronavirus pandemic.

Policymakers in the United States, Europe and Asia have slashed interest rates and opened liquidity taps to stabilise economies left almost comatose, with quarantined consumers, broken supply chains, paralysed transportation and depleted shops.

While finance ministers and central bankers adopted similar strategies, markets and nations where borders were being closed and cities placed in virtual lockdown were further alarmed by bickering between global powers - the United States and China.

There were almost 219,000 cases of coronavirus reported globally, including over 8,900 deaths linked to the virus. Over 20,000 of those cases were reported in the past 24 hours, a new daily record.

While the economic crisis spawned by the pandemic caused carnage in stock markets, almost every currency, except the euro and safe-haven yen, collapsed against the dollar.

The European Central Bank launched new bond purchases worth 750 billion euros ($817 billion) at an emergency meeting late on Wednesday, in a bid to prevent a deep recession that threatened to outdo the 2008-09 global financial crisis. “Extraordinary times require extraordinary action,” ECB President Christine Lagarde said, amid concerns that the strains from burgeoning crisis could eventually tear apart the eurozone as a single currency bloc.

In the United States, the Federal Reserve rolled out its third emergency credit programme in two days, aimed at keeping the $3.8 trillion money market mutual fund industry functioning if investors made rapid withdrawals.

On Sunday, the Fed slashed interest rates to near zero and pledged hundreds of billions of dollars in asset purchases, while President Donald Trump’s administration drew up a $1 trillion stimulus and rescue proposal.

US infections were closing in on 8,000, with the death toll climbing to at least 151. Millions of Americans were staying at home.

The Bank of England slashed its main interest rate to 0.1%, the lowest level since its founding in 1694, and reactivated a bond-buying stimulus program in response to the economic shock of the coronavirus pandemic.

The Bank’s nine-member Monetary Policy Committee said Thursday that the moves were designed “to meet the needs of UK businesses and households in dealing with the associated economic disruption.”

The interest rate cut comes just about a week after the central Bank cut its rate from 0.75% to 0.25% at another emergency meeting. The Monetary Policy Committee, now under new Governor Andrew Bailey, unanimously decided to increase its purchase of mainly government bonds but also corporate bonds, by 200 billion pounds ($230 billion) to 645 billion pounds.

The British pound plunged to its lowest level against the dollar since 1985.

Australia made a historic foray into quantitative easing after an out-of-schedule meeting on Thursday and cut interest rates for the second time in a month.

“Really nothing is off the table,” Australia central bank Governor Philip Lowe said. “We are in extraordinary times and we’re prepared to do whatever is necessary.” South Korea warned of a global credit crunch and said it was setting up crisis funds to stabilise markets.

Central banks in emerging countries from Brazil to India have stepped in this week to buy government bonds to prevent a jump in borrowing costs that would put more pressure on their economies.

Despite those moves, which together with other liquidity injections and stimulus announced in recent weeks reached levels unseen since World War Two, nearly every stock market in Asia was in the red, with Seoul, Jakarta and Manila hitting daily loss limits that trigger the suspension of trade.

The Philippine central bank cut its policy rate be 50 basis points and said it was ready to deploy other policy tools as needed. Indonesia and Taiwan also cut rates.

Meanwhile, Wall Street drifted lower on Thursday as policymakers pulled out all the stops to try and stave off a deep and lasting coronavirus-driven recession and its damaging fallout on corporate America.

In its latest move to stabilise panicked financial markets, the US Federal Reserve opened swap lines with central banks in nine new countries to ensure the world’s dollar-dependent financial system continued to function. US oil prices rose 10% on Thursday after a three-day sell-off. Benchmark Brent, which has lost half its value in less than two weeks, got some respite as investors across financial markets assessed the impact of massive central bank stimulus measures.

Brent crude was up 93 cents, or 3.8%, at $25.81 a barrel by 1416 GMT, having plunged to $24.52 on Wednesday, its lowest since 2003.

West Texas Intermediate (WTI) crude gained $2.20, or 10.8%, to $22.57 after dropping nearly 25% to an 18-year low in the previous session.

Agencies