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GLOBAL MARKETS-Markets crater as coronavirus fears overwhelm central bank emergency measures

Published 17/03/2020, 08:38 am
© Reuters.

(Adds amount of market value lost in paragraph 4)

* U.S., European stocks tumble further into a bear market

* Fear indexes soar, precious metals plummet on Fed moves

* Trading halted for 15 minutes on Wall Street

* Crude oil slides to less than $30 a barrel

* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

By Herbert Lash and Marc Jones

NEW YORK/LONDON, March 16 (Reuters) - Markets reeled on Monday, with stocks on Wall Street and the price of Brent crude tumbling more than 10%, as the Federal Reserve's second emergency rate cut in as many weeks failed to calm fears of a coronavirus-induced recession.

Volatility gauges known as fear indexes spiked, with the Euro STOXX 50 .V2TX in Europe surging almost 28% to an all-time high while the CBOE Market Volatility index .VIX soared 44% to a record close as stocks plunged further into bear territory.

The sell-off gathered speed at the close on Wall Street, with S&P 500 falling 12%, the Nasdaq a bit more and the Dow industrials down almost 13% on the day.

Some $2.69 trillion in market value was wiped from the S&P 500 as it suffered its third-largest percentage decline. Over the past 18 days the benchmark index has lost $8.28 trillion.

Even traditional safe havens cratered as fearful investors decided cash is king.

Platinum XPT= dived nearly 27% to its weakest level since 2002, while gold fell more than 5% as investors unloaded precious metals in exchange for cash as not enough buyers sparked illiquidity, especially in the U.S. Treasury market.

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The S&P 500 plunged 8% at the open to trigger an automatic 15-minute trading halt on the three main U.S. stock indexes, marking the third emergency pause on Wall Street in six days. U.S. stocks furthered their decline after trading resumed.

Investors worried that the Fed action, joined by central banks in Japan, Australia, New Zealand and elsewhere, may be insufficient for companies facing a sharp slide in demand. The moves were reminiscent of the sweeping steps taken more than a decade ago to staunch a meltdown of the global financial system.

Lower rates and increased asset purchases by the Fed will help ease tight credit markets, but the U.S. government needs to do more to address the impact of the coronavirus, said David Joy, chief market strategist at Ameriprise Financial (NYSE:AMP) in Boston.

"The Fed did what it could; I'm not so quick to blame the Fed," Joy said. "Investors are looking around hoping, praying, that there will be a big fiscal package yet to come from Washington - but getting nervous that it might not."

The New York Fed said it would offer an additional $500 billion in support to overnight lending markets, introducing the latest round of essentially unlimited loans meant to keep cash flowing through increasingly tight credit markets. U.S. Senate is under pressure to pass stimulus spending after the House of Representatives last week approved a multibillion-dollar bill.

U.S. President Donald Trump issued new guidelines to help fight the coronavirus, including a recommendation that people avoid social gatherings of more than 10 people, discretionary travel, and going to bars, restaurants and food courts.

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Trump, in remarks just before markets closed, said the new guidelines from his coronavirus task force applied for 15 days and were meant to slow the spread of the virus. ministers in the euro zone said the bloc so far has deployed a fiscal boost worth 1% of its gross domestic product to help the economy withstand the pandemic and pledged to do more if needed. U.S. financial stocks .SPSY plunged 14.0%, leading declines among the major S&P sectors. Energy stocks .SPNY tracked a 10% slump in oil prices, while technology stocks .SPLRCT also slid 13.9%. Apple Inc AAPL.O , Amazon.com Inc AMZN.O and Microsoft Corp MSFT.O together lost nearly $300 billion in market value.

MSCI's gauge of stocks across the globe .MIWD00000PUS shed 9.14% and the pan-European STOXX 600 index .STOXX lost 4.86% as stock markets pared initial deeper losses in Europe. Markets in France .FCHI and Spain .IBEX led the decline as the two countries joined Italy in enforcing a national lockdown.

The benchmark European index has now lost more than a third of its value since hitting a record high in mid-February, while the benchmark S&P 500 and Nasdaq composite are down about 27%.

On Wall Street, the Dow Jones Industrial Average .DJI fell 2,997.1 points, or 12.93%, to 20,188.52. The S&P 500 .SPX lost 324.89 points, or 11.98%, to 2,386.13 and the Nasdaq Composite .IXIC dropped 970.28 points, or 12.32%, to 6,904.59.

Almost nothing was left unscathed. Oil, already slammed by a Saudi-instigated price war, slid to less than $30 a barrel to lows last seen in early 2016.

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Oil futures for West Texas Intermediate CLc1 , the U.S. benchmark, fell $3.03 to settle at $28.70 a barrel, while Brent crude futures LCOc1 fell $3.80 to settle at $30.05 a barrel.

There were moves in Europe to curb short-selling of stocks as bond markets weighed the risk to vulnerable countries, as well as the impact of a fiscal spending splurge on safe-haven debt. EUR/GVD

Benchmark 10-year Treasury notes US10YT=RR last rose 66/32 in price to yield 0.745%.

The Fed's emergency 100-basis-point rate cut on Sunday was matched by the renewal of its quantitative easing program to increase cash in markets and more cheap U.S. dollar funding to ease a ruinous logjam in global lending markets.

There was further policy easing on Monday from the Bank of Japan in the form of a pledge to ramp up purchases of exchange-traded funds and other risky assets. Zealand's central bank cut rates 75 basis points to 0.25%, while the Reserve Bank of Australia pumped more money into its financial system. South Korea and Kuwait both lowered rates, while Russia and Germany were throwing together multi-billion dollar anti-crisis funds. index of Asia-Pacific shares outside Japan .MIAPJ0000PUS tumbled 5.2% to lows not seen since early 2017, while the Nikkei .N225 fell 2.5% as the BoJ's easing steps failed to reassure markets.

U.S. and Chinese data underscored just how much economic damage the disease can cause, with official numbers in China showing the worst drops in activity on record. Industrial output plunged 13.5% and retail sales 20.5%. activity in New York state also plunged in March by the most on record to its lowest level since 2009, offering an early glimpse of the coronavirus' damaging impact on the U.S. economy. Asia, Shanghai blue chips .CSI300 fell 4.3% overnight even as China's central bank surprised with a fresh round of liquidity injections to the financial system. Hong Kong's Hang Seng index .HIS tumbled 4%.

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The safe-haven Japanese yen jumped as concerns about the outbreak sent investors fleeing higher-risk assets.

The dollar index =USD rose 0.176%, with the euro EUR= up 0.63% to $1.1175.

The Japanese yen strengthened 1.91% versus the greenback at 105.92 per dollar.

U.S. gold futures GCcv1 settled 2% lower at $1,486.5 an ounce.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GRAPHIC-Coronavirus pummels markets

https://tmsnrt.rs/2IPoKIb GRAPHIC-World stocks plunge on virus worries

https://tmsnrt.rs/3aYuAD1 GRAPHIC-Volatility is back on Wall Street

https://tmsnrt.rs/39JliL5 GRAPHIC-Asia stock markets

https://tmsnrt.rs/2zpUAr4 GRAPHIC-Asia-Pacific valuations

https://tmsnrt.rs/2Dr2BQA

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