Wall Street plunged once again today despite the prospect of a $1 trillion (£850bn) fiscal stimulus package to support the economy during the coronavirus outbreak and yet more action from the Federal Reserve.
The Dow Jones industrial average index was last down 10.7 per cent, the S&P 500 had shed 9.7 per cent, and the Nasdaq had dropped 8.7 per cent, giving up all of the gains made yesterday on the back of stimulus hopes.
Falls were so pronounced they once again triggered so-called “circuit breakers” which are designed to prevent panic selling and pause the market for 15 minutes.
The continuation of the long-running sell-off – Wall Street has now fallen more than 30 per cent since recent highs – came as investors faced up to the reality of a deep global recession.
Travel, tourism and energy stocks were hit hard. United Airlines plunged 32.4 per cent, MGM resorts slumped 34.8 per cent and Noble Energy fell 29.6 per cent.
Bonds also came under pressure despite safe-haven assets usually doing well at times of stress. The yield on the 10-year US Treasury rose to 1.16 per cent, while the German 10-year Bund yield hit a two-month high. Yields rise while prices fall.
The sell-off in bond markets indicated that traders are dumping a broad range of asset classes in favour of holding the dollar. One driver of this has been customers withdrawing their money from investment funds, causing managers to sell liquid assets.
“The extraordinary moves seen in global markets have ultimately led to a rush into the US dollar, as the world’s funding currency,” said Joe Tuckey, analyst at foreign exchange firm Argentex.
The dollar index – which shows demand for the greenback against other currencies – rose 1.8 per cent to its highest point since 2017.
European stocks also fell, with the pan-European Stoxx 600 index closing down 3.9 per cent. Britain’s FTSE 100 finished 4.1 per cent lower, Germany’s Dax ended down 5.6 per cent, and France’s CAC 40 was 5.9 per cent lower.
Traders have not been encouraged by large stimulus packages such as the UK government’s £330bn business loans scheme.
The US government and Congress are currently thrashing out a stimulus package that could be worth $1 trillion, including a $50bn bailout for the aviation industry and even hundreds of billions of dollars sent directly to Americans.
But investors say their focus is on virus, which is spreading quickly in Europe and the US. There have now been almost 200,000 confirmed cases of coronavirus and more than 8,400 deaths.
Containment efforts, which have put whole countries on lockdown, are set to decimate economies. Deutsche Bank economists today predicted the worst slowdown since World War II.