Markets tumble as scale of stimulus programs numbs investors

Global equities tumbled further on Wednesday, with bond and gold prices also sliding in an unusual tandem, as markets grappled with the scale of government programs aimed at softening the economic shockwave from the coronavirus.

The Trump administration asked Congress to approve $500 billion in cash payments to taxpayers in two rounds starting April 6 and $50 billion in secured loans to U.S. airlines to address the outbreak’s impact.

Traders struggled to sort out various moves by governments and global central banks to shore up economies bracing for what looks likely to be a short but deep global recession from a still growing pandemic.

The rout pushed the S&P 500 below its level of the December 2018, a key psychological low point that many investors hoped would not be breached. The benchmark U.S. stocks index has fallen 29.2% in 20 sessions.

Wall Street pared some losses to close about 5% and gold fell 3.6% at one point as investors dumped precious metals and other safe-havens for cash after the additional U.S. stimulus measures unveiled Tuesday failed to calm markets.

Heavy demand for U.S. Treasury securities and the difficulty of the market to function as a vehicle for price discovery was creating dislocations, said Marvin Loh, senior global macro strategist at State Street.

“The ability in the Treasury market to transact the type of volume that they normally do is very pressed,” Loh said.

“The more and more intense and volatile this environment gets, for me, the harder it is to see it function until we get a little bit of calm,” he said.

Rapidly rising yields for Treasuries and German bunds, the benchmark for euro zone lending, have made cash the only risk-free asset, said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank in Frankfurt.

“This is not just a financial markets crisis; it is a real economic crisis and therefore the fact that this demands extremely high fiscal responses makes even those usual safe- havens more difficult to hold,” Leuchtmann said.

Estimates for the duration of the damage extend into the summer. Japan already is in a recession, a downturn is imminent in Europe and a U.S. recession will start in the second quarter, a report from IHS Markit said.

The U.S. economy could shrink 4% this quarter and 14% next quarter, and for the year is likely to shrink 1.5%, a JP Morgan economist said, one of the most dire forecasts yet issued for the potential hit from the epidemic.

The coronavirus has raised the prospect of the steepest ever annual fall in oil demand, Goldman Sachs said. U.S. crude futures plummeted to an 18-year low and Brent hit more than 16-year low as travel and social lockdowns slammed demand.

Certain correlations are breaking down in the markets as typical safe-haven assets sell off, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“During a dramatic risk-off situation you would expect to see at least a little bit of a bid in bonds or maybe in gold, but we’re seeing the opposite,” Abbasi said.

“Despite the continued pain in equities, the safe-haven asset correlation seems to be now trading with risk assets, rather than the inverse to them,” he said.

A repricing of in the Treasury market added to anxiety about spread of the cornavirus, while the plunge in oil prices did not help, said Nela Richardson, investment strategist at Edward Jones.

“The trigger was really the global fiscal response to the pandemic. In the long term its good news but the short term response in Treasuries is how are we going to pay for it?”

Bond prices tumbled, instead of rising, as investors sold to raise cash. Yields on the benchmark 10-year U.S. Treasury yield rose to 1.2080%, after hitting 1.266%.

In Europe, the gap between German and other euro zone bond yields widened, with investors demanding higher premiums to hold anything but German debt.

Ten-year French government bonds yielded 69 basis points more than their German counterparts, the most since April 2017.The gap between 10-year German and Dutch debt grew as wide as 37basis points, the most since July 2015.

U.S. gold futures settled 3.1% lower at $1,477.90 an ounce.

“Gold continues to suffer from risk-off panics in the market, trading back below $1,500 level,” said Tai Wong, head of base and precious metals derivatives trading at BMO.

“Liquidity here, as in most markets, is deeply compromised and we expect to see continuing volatility, mood-driven swings,” Wong said.

MSCI’s gauge of stocks across the globe shed 5.06% and emerging market stocks lost 4.70%. The pan-European STOXX 600 index lost 3.92%.

On Wall Street, the Dow Jones Industrial Average fell 1,338.46 points, or 6.3%, to 19,898.92. The S&P 500 lost 131.09 points, or 5.18%, to 2,398.1 and the Nasdaq Composite dropped 344.94 points, or 4.7%, to 6,989.84.

Boeing Co fell another -18.6% as the planemaker called for a $60 billion bailout for U.S. aerospace manufacturers facing the fallout of an extended collapse in global travel.

European bourses tumbled, with indexes in London, Frankfurt and Paris plunged from 4% to 5%.

In Asia, the MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 4% to lows last seen in summer 2016, led by a 6.4% fall in Australia. Japan’s Nikkei dipped 1.7%.

The economic slowdown will be tough on travel-related industries, gaming and brick-and-mortar retail, said Scott Crowe, chief investment strategist at real estate-focused CenterSquare Investment Management in Philadelphia.

U.S. clothing retailer Gap Inc and luxury department store operator Neiman Marcus will close their stores for two weeks, joining other retailers in a widespread effort to stem the spread of the coronavirus.

“It’s a little less obvious whether the government will start bailing out retailers. The problem is that a lot of these retailers were already teetering on a knife edge coming into this,” Crowe said. “There are very few industries right now that can sustain to a four- to eight-week shutdown.”

U.S. crude hit its lowest since March 2002, falling even after weekly government data that otherwise could have been supportive to prices. The draw on gasoline stockpiles and smaller-than-expected build in crude inventories showed that people were preparing ahead of business and school closings, analysts said.

U.S. crude fell $6.58 to settle at $20.37 a barrel as a 56% slide over the past 10 days marked the worst stretch over a similar period of time since the futures contract was launched in 1983.

145 thoughts on “Markets tumble as scale of stimulus programs numbs investors

  1. Excellent post. I was checking continuously this blog and I’m impressed! Extremely helpful info specially the last part 🙂 I care for such info much. I was seeking this particular info for a long time. Thank you and good luck.

  2. I know this if off topic but I’m looking into starting my own weblog and was wondering what all is required to get setup? I’m assuming having a blog like yours would cost a pretty penny? I’m not very internet smart so I’m not 100 sure. Any tips or advice would be greatly appreciated. Many thanks

  3. There are definitely a whole lot of details like that to take into consideration. That is a nice point to convey up. I offer the thoughts above as common inspiration however clearly there are questions like the one you deliver up the place crucial factor will be working in trustworthy good faith. I don?t know if finest practices have emerged round things like that, however I am sure that your job is clearly identified as a good game. Both girls and boys really feel the influence of just a second’s pleasure, for the remainder of their lives.

  4. Great – I should certainly pronounce, impressed with your web site. I had no trouble navigating through all the tabs as well as related info ended up being truly easy to do to access. I recently found what I hoped for before you know it in the least. Quite unusual. Is likely to appreciate it for those who add forums or something, web site theme . a tones way for your customer to communicate. Excellent task.

  5. I haven’t checked in here for some time because I thought it was getting boring, but the last few posts are good quality so I guess I will add you back to my daily bloglist. You deserve it my friend 🙂

  6. I was wondering if you ever considered changing the page layout of your blog? Its very well written; I love what youve got to say. But maybe you could a little more in the way of content so people could connect with it better. Youve got an awful lot of text for only having 1 or 2 pictures. Maybe you could space it out better?

  7. Hi! I know this is kinda off topic nevertheless I’d figured I’d ask. Would you be interested in exchanging links or maybe guest authoring a blog post or vice-versa? My website discusses a lot of the same topics as yours and I think we could greatly benefit from each other. If you’re interested feel free to shoot me an email. I look forward to hearing from you! Fantastic blog by the way!|

  8. Simply wish to say your article is as surprising. The clearness in your post is just great and i could think you are an expert in this subject. Well along with your permission allow me to grasp your RSS feed to stay updated with approaching post. Thank you one million and please continue the gratifying work.|

  9. Link exchange is nothing else however it is just placing the other person’s weblog link on your page at suitable place and other person will also do same in support of you.|

  10. certainly like your web site but you have to take a look at the spelling on quite a few of your posts. Several of them are rife with spelling problems and I to find it very troublesome to inform the truth nevertheless I’ll surely come again again.|

  11. I want to to thank you for this very good read!! I definitely loved every bit of it. I’ve got you book marked to check out new stuff you post…|

  12. Nice read, I just passed this onto a friend who was doing a little research on that. And he just bought me lunch since I found it for him smile So let me rephrase that: Thanks for lunch!

  13. Needed to send you the very little word to finally thank you so much the moment again regarding the spectacular techniques you have shared on this site. This has been simply surprisingly open-handed with you to present unreservedly what most of us would’ve sold for an electronic book to help make some money on their own, precisely seeing that you might well have tried it in the event you wanted. Those tactics in addition worked to become great way to realize that someone else have the same keenness similar to my very own to realize somewhat more with reference to this problem. I know there are some more pleasurable situations up front for people who scan through your website.

  14. I simply wished to thank you very much yet again. I do not know what I would have tried without these techniques shared by you regarding this subject matter. It was before the scary scenario in my position, nevertheless taking note of this specialized tactic you solved the issue took me to weep with happiness. Now i’m thankful for your support and thus trust you really know what an amazing job you were putting in training the mediocre ones via your webpage. Most probably you haven’t met any of us.

  15. My husband and i felt now excited Emmanuel could conclude his inquiry from your ideas he gained in your site. It’s not at all simplistic just to choose to be giving for free ideas that most people have been making money from. And we all do understand we have the website owner to be grateful to because of that. The explanations you’ve made, the easy site menu, the friendships you can give support to engender – it’s everything extraordinary, and it’s facilitating our son and our family feel that that idea is cool, and that is highly important. Many thanks for all the pieces!

  16. I simply had to appreciate you all over again. I am not sure the things that I might have gone through in the absence of the entire opinions documented by you directly on such industry. It had become a real fearsome difficulty in my circumstances, however , finding out the skilled manner you managed that made me to jump over fulfillment. I am happier for this help and even hope you find out what a great job you are doing instructing other individuals through the use of your site. I know that you have never encountered all of us.

  17. My spouse and i have been really lucky that Jordan managed to finish off his research through your precious recommendations he had through the web pages. It is now and again perplexing to just find yourself handing out solutions which people today may have been selling. Therefore we know we need the writer to give thanks to for that. The most important illustrations you have made, the simple web site navigation, the relationships you will make it possible to promote – it is mostly wonderful, and it is making our son in addition to us understand this topic is thrilling, which is certainly wonderfully vital. Thanks for the whole thing!

  18. I enjoy you because of all of the effort on this blog. Betty delights in carrying out internet research and it’s easy to see why. A lot of people hear all about the compelling form you convey both interesting and useful guidelines by means of the blog and attract contribution from other individuals about this area and my child has always been becoming educated a great deal. Enjoy the remaining portion of the new year. You’re carrying out a dazzling job.

  19. Thanks for the tips about credit repair on this blog. Things i would advice people would be to give up the actual mentality that they’ll buy right now and pay out later. Like a society all of us tend to do that for many things. This includes holidays, furniture, as well as items we would like. However, you have to separate your own wants from all the needs. When you are working to improve your credit rating score make some sacrifices. For example you are able to shop online to save money or you can turn to second hand shops instead of costly department stores with regard to clothing.

  20. My husband and i ended up being absolutely contented Chris could complete his basic research by way of the ideas he came across from your own blog. It’s not at all simplistic just to be giving away guides many people could have been making money from. And we consider we’ve got the blog owner to appreciate because of that. All the explanations you’ve made, the easy blog menu, the friendships you assist to create – it’s all awesome, and it’s assisting our son and our family consider that that concept is awesome, and that’s exceptionally fundamental. Many thanks for all!

  21. Thanks for your entire labor on this web site. My mother take interest in participating in research and it is simple to grasp why. My spouse and i notice all regarding the powerful tactic you produce useful thoughts via your website and in addition recommend response from the others on this subject then our own princess is truly studying a whole lot. Take pleasure in the rest of the year. You have been performing a terrific job.

Leave a Reply

Your email address will not be published.