Stock markets sunk yesterday despite central banks announcing a co-ordinated effort to ease the effects of the coronavirus.
London’s FTSE 100 index dropped more than 4%, with other major European markets also suffering declines.
On Wall Street, US markets plunged more than 7%, prompting an automatic suspension of trade in the minute after markets opened.
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The Guardian reports that “mounting concerns over a possible global recession” triggered the falls, adding that they come “despite dramatic action taken by the US central bank”.
The Federal Reserve “slashed interest rates to near zero in an unprecedented attempt to shore up the US economy”, the paper says.
In what The New York Times describes as a series of “extraordinary steps”, the Fed also announced that it would expand its balance sheet by at least $700bn (£565bn) in the coming weeks to help stabilise market confidence.
Investors now fear that the global economy “could experience a downturn rivaling the cataclysmic recession after the financial crisis a decade ago”, the paper adds.
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Dharshini David, global trade correspondent for the BBC, writes: “Sunday’s extravaganza by the Fed showed how central banks can go big. But interest rate cuts are of limited use; they won't tempt customers to go out and spend in Marseille or New York when the bars are closed and flights cancelled.”
David Madden, a market analyst at CMC Markets, said that while central bankers were trying to calm the markets, “in reality it is having the opposite effect”.
“The radical measures have sent out a very worrying message to dealers, and that is why they are blindly dumping stocks.”
Paul Markham, global equities portfolio manager at the asset manager Newton Investment Management, said: “As the last few weeks have unfolded there has been a growing fear that the world faces a perfect storm. A strong nerve will be required and it may well get darker before we see the light.”
“Things are getting ugly,” added Neil Shearing, chief economist at the consultancy Capital Economics.
“History suggests that equity markets are only likely to bottom out when it becomes clear that the flow of new cases of the virus has peaked. Until this happens, we should expect stock markets to remain under pressure.”
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