Panicked investors this morning more than wiped out the gains the FTSE 100 made yesterday, as traders shrug off massive stimulus packages from governments and keep selling risk assets over fears of a coronavirus-induced recession.
The FTSE 100 was last down 4.8 per cent, having shed 252 points to stand at 5,042 points.
That killed yesterday’s 2.8 per cent increase after chancellor Rishi Sunak announced £330bn in government-backed loans for British businesses and £20bn of handouts.
Other governments also rolled out the big guns in an effort to curb the fallout from coronavirus, which has put whole economies on lockdown.
US President Donald Trump was yesterday negotiating an $850bn stimulus package with Congress, and even floated the idea of sending money directly to Americans.
Yet investors have resumed selling stocks this morning as they doubt anything but the most extreme of measures can prevent a drastic economic slowdown.
European stocks sink
European stocks also gave up yesterday’s gains as they plunged despite the stimulus measures. Germany’s Dax sank 4.7 per cent while France’s Cac staggered five per cent.
“Enormous stimulus packages from the UK and US governments managed just a single day bounce in equity markets,” said Craig Erlam, senior market analyst at currency trading platform Oanda.
“The enormous measures announced are extremely encouraging, but as far as investors are concerned right now, it’s too early to get excited.” he said.
Markets.com analyst Neil Wilson warned: “The fact that markets keep shrugging off the stimulus measures reflects the deep uncertainty about the economic damage about to be done.”
However, he added. ‘But these moves are not the seven, eight, nine, 10 per cent type swings. This is better – smaller daily swings are the first step to stabilisation before we can start to look at the bottom being in.”
But yet another day of global stocks turmoil is on the cards after Asian stocks slumped overnight.
Japan’s Nikkei dropped 1.7 per cent despite reports of imminent economic measures to mitigate the coronavirus fallout. Hong Kong’s Hang Seng index plunged 4.3 per cent.
‘Coronavirus stimulus offers certainty’
“The direction and scale of the monetary and fiscal policy response continue to move in the right direction,” said UBS Global Wealth Management’s Mark Haefele.
“Although it remains early days, further signs of virus containment across key developed markets could begin to lay the ground for a more sustained rally in risky assets.”
However, the focus for economic policymakers remains on ensuring companies and financial firms have enough access to cash to survive.
The US Federal Reserve has been particularly active in that regard, yesterday announcing it would buy companies’ short-term debt and let some of the biggest financial players borrow against equities.
The Bank of England has also been proactive, slashing interest rates and supporting businesses in conjunction with the government.
Yet things are moving fast and central banks will undoubtedly have to do more. Anna Titareva at UBS said: “We now expect the [Bank of England] monetary policy committee to cut its bank rate by 15 basis points to the perceived hard floor at 0.1 per cent and to increase its quantitative easing purchases by £110bn.”
Threadneedle Street has so far stopped short of following other banks in relaunching quantitative easing – creating digital money to buy up bonds.
FTSE 100 stocks plunge again
Stimulus measures could not stop a wide range of FTSE 100 stocks falling this morning. Aerospace firm Meggitt and industrial equipment group Ashtead led the blue-chip lower, falling 22.4 per cent and 17.2 per cent respectively.
Cruise company Carnival had dropped 15.2 per cent on the back of plunging demand for holidays.
But Sainsbury’s jumped seven per cent after announcing new rationing measures to combat coronavirus stockpiling and an older persons’ shopping hour. Fellow supermarket Morrison’s also climbed 6.7 per cent.