Egypt Independent

Stocks, crude hammered as Trump’s Europe ban fans recession fears

Equities and oil prices fell through the floor again on Thursday after Donald Trump banned all travel from Europe to the US for a month to fight the coronavirus, ramping up fears the global economy will careen into recession.

The news came after the World Health Organization officially labelled the outbreak a pandemic and hit out at “alarming levels of inaction” for its spread.

Asian equity markets, already deep in the red in reaction to the WHO announcement, cratered after Trump’s address.

Tokyo ended down 4.4 percent, while Sydney lost 7.4 percent in the ASX 200’s worst day since the 2008 financial crisis. Hong Kong fell 3.5 percent in the afternoon while Shanghai was off 1.5 percent.

Seoul, Singapore and Jakarta each lost more than three percent, while Mumbai tanked more than six percent and Bangkok more than eight percent.

Manila crashed almost 10 percent after it emerged Philippines President Rodrigo Duterte would undergo a precautionary test for the virus, while he, his finance minister and head of the central bank were among several officials who were to go into quarantine.

Wellington lost five percent and Taipei retreated 4.3 percent.

The Japanese yen, a key haven in times of crisis, jumped more than one percent against the dollar.

“Travel restrictions equal slower global economic activity, so if you need any more coaxing to sell… after a massively negative signal from trading in US markets it just fell in your lap,” said AxiCorp’s Stephen Innes.

The losses followed another brutal session on Wall Street, with wave after wave of bad news, including Hilton withdrawing its earnings forecast and Boeing saying it would suspend most hiring and overtime pay.

The Dow fell into a bear market having lost more than 20 percent since its recent high, and futures pointed Thursday to another rout in New York and Europe.

The coronavirus outbreak has left virtually no sector untouched, though travel and tourism have been particularly hard-hit as countries institute travel bans and quarantine requirements, with Italy in a country-wide lockdown.

The number of cases across the globe has risen to more than 124,000 with 4,500 deaths, according to an AFP tally.

In announcing the Europe ban — which excludes Britain — Trump said the continent had seen a surge in new cases because governments failed to stop travel from China, where the COVID-19 epidemic began.

He said the prohibitions would also “apply to the tremendous amount of trade and cargo,” and “various other things as we get approval”.

However, the White House afterwards clarified that “the people transporting goods will not be admitted into the country, but the goods will be”.

‘Crying out for a response’

Oil prices were also hammered, with both main contracts falling around six percent at one point before edging back slightly. The oil market was already under pressure after Saudi Arabia and Gulf partner UAE stepped up a price war with plans to flood global markets.

The Saudi move was the latest escalation of a fight among oil producers after Russia balked at an OPEC-backed plan to cut production in response to lost demand because of the coronavirus.

“Markets are crying out for a co-ordinated response to COVID-19 headwinds and a lack of concrete US policy action is rattling markets,” said Tapas Strickland, senior analyst at National Australia Bank.

Trump’s address included several measures intended to ease the financial burden particularly for small business, including payroll tax relief and deferred tax payments.

But he did not unveil any large-scale tax cuts, which OANDA’s Jefrey Halley said “has probably disappointed markets more than anything”.

The bloodbath across global trading floors has come despite a raft of measures by governments worth at least $150 billion to offset the impact of the outbreak, while central banks will be called upon to cut already low interest rates and introduce other fiscal measures.

German Chancellor Angela Merkel has said she will do “whatever is necessary” to help the economy, while the European Central Bank is to hold a policy meeting later in the day at which it is under pressure to open up the taps.

Key figures around 0730 GMT

Tokyo – Nikkei 225: DOWN 4.4 percent at 18,559.63 (close)

Hong Kong – Hang Seng: DOWN 3.5 percent at 24,344.13

Shanghai – Composite: DOWN 1.5 percent at 2,923.49 (close)

Brent North Sea crude: DOWN 3.8 percent at $34.44 per barrel

West Texas Intermediate: DOWN 4.0 percent at $31.67 per barrel

Dollar/yen: DOWN at 103.91 yen from 104.54 yen

Euro/dollar: UP at $1.1300 from $1.1276 at 2100 GMT

Pound/dollar: DOWN at $1.2814 from $1.2825

Euro/pound: UP at 88.14 pence from 87.91 pence

New York – Dow: DOWN 5.9 percent at 23,553.22 (close)

London – FTSE 100: DOWN 1.4 percent at 5,876.52 (close)

Reporting by AFP; Bloomberg News contributed to this story

Image: A pedestrian passes in front of a quotation board displaying falling share price numbers at the Tokyo Stock Exchange (AFP/ Kazuhiro Nogi)