New central bank intervention has challenged renewed stock market losses as business activity across the Western world winds down because of coronavirus.
There were widespread losses across Asia overnight and in morning trading across Europe linked to the COVID-19 outbreak.
Chief among the worries is the shut down of normal life as we know it, given the withdrawal of everyday services such as flights, bars, restaurants and shops – with McDonald’s among the latest chains to announce closure plans.
In addition to the efforts to fight the virus, there were also investor concerns for a near $2trn package of support for the US economy planned by Donald Trump’s White House.
Nerves grew after the Senate rejected the package on the grounds it was too corporate heavy – with not enough for individuals.
The FTSE 100 endured early losses – of up to 5% – but these were challenged when America’s treasury secretary said a deal was “very close” and news emerged of further stimulus from the US central bank.
The Federal Reserve announcement, which included up to $300bn of lending to businesses and the purchase of more US government debt “in the amounts needed” to support activity, was aimed at offsetting the “tremendous hardship” caused by coronavirus.
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However, the package was not enough to stem the bleeding completely as the FTSE was 4.3% down by the close, at 4,965, while the Dow was 2% down.
The New York Stock Exchange was operating digital-only trading after its physical floor operation was shut down.
Of UK-listed firms reporting on Monday, Royal Dutch Shell overcame early losses to gain 6% after it revealed a battle plan to free up $8bn-$9bn of free cash flow through reductions in costs and spending – with its share buyback programme among the casualties.
ITV said it was abandoning its dividend commitment but admitted it was too early to put figures on the hit to revenues and profits from falling advertising revenues and production delays.
Go Ahead and First Group also released statements to accompany a Department for Transport announcement that rail franchise agreements were to be suspended to support operators.
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Officials said companies were to be paid a small management fee to run services, with all revenue and cost risk transferred to the government.
Rail and bus operator Stagecoach said it was unlikely to pay further dividends in its current financial year and had also ceased all non-essential spending.
Market watchers pointed the finger for the latest falls at deteriorating forecasts for global economic output as lockdowns are imposed – ceasing all but essential services for consumers and businesses.
Analysts at US bank Morgan Stanley wrote: “Further deterioration in the COVID-19 outbreak is severely damaging the global economy.
“We expect global growth to dip close to GFC (global financial crisis) lows, and US growth to a 74-year low in 2020.
Germany was to reveal its package of support for businesses and individuals later on Monday that is understood to total EUR800bn.
In the UK, the government confirmed its loan guarantee scheme had opened for small and medium-sized firms
borrow up to £5m.
Further measures to help larger firms have been promised while the Treasury was also expected to bolster its package of financial help for workers, announced on Friday, by revealing aid for the country’s five million self-employed.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said of the market reaction: “Global equities continue falling into a bottomless pit as the coronavirus death toll rises, bringing along more travel restrictions and lockdowns across the globe.
“And it appears that the colossal support packages mobilised by central banks and governments won’t suffice to better the investor mood, if we don’t see a worldwide peak in coronavirus cases.”