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Stocks plunge into bear market as Trump's Europe travel ban adds to economic headwinds

Stock MarketsMar 12, 2020 08:35AM ET
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By Ritvik Carvalho

LONDON (Reuters) - Global stocks plunged into a bear market and oil slumped on Thursday after U.S. President Donald Trump banned travel from Europe to stem the spread of coronavirus, threatening more disruption to the world economy.

With the pandemic wreaking havoc on the daily life of millions, investors were also disappointed by the lack of broad measures in Trump's plan to fight the virus, prompting traders to bet on further aggressive easing by the U.S. Federal Reserve.

"He (Trump) did not announce any new concrete measures such as a large-scale payroll tax cut to buffer the economy against the impending coronavirus slowdown," said Jeffrey Halley, senior market analyst at OANDA.

"That has probably disappointed markets more than anything."

European shares (STOXX) plummeted to their lowest in almost four years, with the benchmark STOXX 600 index falling 6% by midday in London. Travel and leisure stocks shed 9.9%, hitting their lowest in more than six years. (SXTP)

The falls pushed the MSCI All-Country World Index (MIWD00000PUS), which tracks stocks across 49 countries, into bear market territory, down 20% from its 52-week peak.

The index was down over 2% on the day.

Investors also rushed into safe-haven assets, from bonds to gold to the yen and the Swiss franc. Bitcoin plunged 25%, amid wild volatility in cryptocurrency markets.

U.S. S&P 500 futures (ESc1) plummeted as much as 5% in European trading hours, a day after the S&P 500 (SPX) lost 4.89%, leaving the index on the brink of entering bear market territory, defined as a 20% fall from a recent top.

The VIX volatility index (VIX) -- Wall Street's "fear gauge" -- and an equivalent measure of volatility for the Euro Stoxx 50 (V2TX) hit their highest levels since the 2008 financial crisis.

Japan's Nikkei (N225) crumbled 4.4% to a trough last seen almost three years ago, while MSCI's broadest index of Asia-Pacific shares outside Japan (MIAPJ0000PUS) fell 5%.

Australian shares (AXJO) plunged 7.4% to their lowest level in more than three years while Seoul's Kospi (KS11) fell 4.8% to 4-1/2-year lows, with massive selling prompting a brief trade halt. Thai shares (SETI) sank 10.8% to eight-year lows.

Trump announced on Wednesday the United States will suspend all travel from Europe, except the United Kingdom and Ireland, to the United States for 30 days starting on Friday. He said trade will not be affected by the restrictions.

Trump also announced some other steps, including instructing the Treasury Department to defer tax payments for entities hit by the virus.

"The travel ban from Europe has definitely taken everyone by surprise," said Khoon Goh, head of Asia Research at ANZ in Singapore.

"Already we know the economic impact is significant, and with this additional measure on top it's just going to multiply the impact across businesses. This is something that markets had not factored in ... it's a huge near-term economic cost."

In the money market, traders further raised expectations of another U.S. rate cut, even after the Fed's emergency cut last week.

Fed fund rate futures are now pricing in a large possibility of a 1.0 percentage point cut, rather than 0.75, at a policy review on March 17-18.

PANDEMIC

The World Health Organization (WHO) described the outbreak as a pandemic for the first time on Wednesday.

The highly infectious coronavirus that shut down most of China for much of February is spreading rapidly in Europe and increasingly in the United States, disrupting many corners of life from education to sports, entertainment and dining.

Investors worry how much of an effect policies can have in turning around the global economy given the restrictions on daily life, travel and business.

A case in point was Britain, where the FTSE stock index (FTSE) hit near four-year lows on Wednesday as investors doubted whether the $39 billion government spending plan and 0.5 percentage point Bank of England rate cut announced on Wednesday would be enough to counter the shock from the outbreak.

The index fell even further on Thursday, down 5.75%.

The British pound last stood at $1.2722 , down 0.6% on the day.

Gold fell 0.6% to $1,624.16 per ounce but still stood well below Monday's high above $1,700.

The 10-year U.S. Treasury yield fell to 0.6861% (US10YT=RR) -- still above a record low of 0.318% touched on Monday. The two-year yield (US2YT=RR) fell to 0.3898%, but stood well above Monday's low of 0.251%.

In commodities, oil prices were also hit, compounded by an intensifying price war between Saudi Arabia and Russia, on top of fears of a sharp slowdown in the global economy.

U.S. West Texas Intermediate (WTI) crude (CLc1) shed 6.06% to $30.98 per barrel. Brent crude fell 6.5% to $33.46. (LCoc1)

Copper, seen as a gauge of global economic health because of its wide industrial use, fell to over three-year lows. [MET/L]

In the currency market, the dollar slid against the safe-haven yen and Swiss franc.

The U.S. currency fell 0.89% to 103.60 yen and lost 0.14% to 0.9366 francs .

The euro traded at $1.1243 (EUR=), down 0.2% ahead of the European Central Bank's policy meeting later in the day.

The ECB is all but certain to unveil new stimulus measures, including new, ultra-cheap loans for banks to pass on to small and medium-sized firms.

Stocks plunge into bear market as Trump's Europe travel ban adds to economic headwinds
 

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Comments (22)
Chris Sundo
Chris Sundo Mar 12, 2020 11:16PM ET
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DUMP TRUMP !!  or is it the TRUMP DUMP?   I wouldn't be surprised if his trader team went short way BEFORE now. -- No POTUS would have ever pulled off such a stunt of closing off the borders to Europe. POTUS's INCOMPETENCE IS EXACERBATED BY HIS CHILDISH ATTITUDES. THE CHILD IN HIM, GIVEN ADULT EARS, is fearful for the survival of America and so the child in him acts irrationally protective of his homeland. -- IRS, I bet, won't audit his tax returns no more coz he's finished as a prez anyway. Maybe GOP could be re-elected but not Trump.
Chris Martin
Chris Martin Mar 12, 2020 9:10AM ET
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Dopey dems still never work with him FOR US, so I see many problems for us as the chronics on the left would let US suffer dramatically in an attempt to hurt the Prez. THEN we have the Wuhan Virus thanx to the commies... Thanx China
Darren Ikin
Darren Ikin Mar 12, 2020 9:10AM ET
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you're absolutely mad haha
Tom Woosley
Tom Woosley Mar 12, 2020 8:23AM ET
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Travel ban? What took so long?
Chris Sundo
Chris Sundo Mar 12, 2020 4:58AM ET
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A mad prez can no longer be contained. Does he ask his team? This virus will travel around the world as it pleases and will mutate and be back next flu season ONE WAY OR ANOTHER: Does it make sense to destroy the world RIGHT NOW TRYING TO AVOID A FOREGONE CONCLUSION before the virus comes back anyway NEXT SEASON? -- Oh Mann Oh Mann. Der Mann ist verrueckt !!
Chris Martin
Chris Martin Mar 12, 2020 4:58AM ET
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Get a grip Sundope...
Michael Hartmann
Michael Hartmann Mar 12, 2020 4:14AM ET
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why is nobody talking about the coming credit shock? it will be huge; individual and corporate defaults worldwide. That will start the REAL selling.
Henri Palomäki
Henri Palomäki Mar 12, 2020 4:14AM ET
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Exactly. Financialization has become the devil of the economy. Federal reserves have had their hands full in trying to keep this house of cards from not toppling over. No more organic growth through innovation and progress - just more cheap debt and speculation. This will be bad.
Chris Martin
Chris Martin Mar 12, 2020 4:14AM ET
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People are scared enuf that moe people like you that add more fear to others doesn't help-
Sam Mojtabai
Sam Mojtabai Mar 12, 2020 4:10AM ET
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Just wait 15 days, The US will be likeItaly is today
Azam Khan
Azam Khan Mar 12, 2020 4:02AM ET
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Ok pandemic is declared end of the world stop living and loose all your money but we will not take any preventive measures this is what we have decided. Now we have to live with it we all have to admit this is deadily virus and we have to live with it and fight with it. Take sanitizers with you keep your hands washed when ever you touch objectsit it will go away. Try to prevent it rather than getting afraid of it. God knows better whether people are dying from this virus or from flu that we normally have nothing is prominant.
Syed Tariq Hussain
Syed Tariq Hussain Mar 12, 2020 4:01AM ET
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Why Uk exempted? Does virus entry exempted to enter in UK :)
Richard Collins
CrystalKen Mar 12, 2020 4:01AM ET
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Because our infection numbers are much lower than Italy and Spain.
Syed Tariq Hussain
Syed Tariq Hussain Mar 12, 2020 4:01AM ET
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Virus is pretty intelligent, I guess it first check whether you're EU member or not :p
Sunny Mehta
Sunny Mehta Mar 12, 2020 3:52AM ET
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Corona virus is a Hoax
First Last
First Last Mar 12, 2020 3:47AM ET
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Better late than never I guess. But I think its too late.
Paul Dunne
Paul Dunne Mar 12, 2020 3:19AM ET
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No problem. I'll just fly to London first and go from there to USA.
John Wim
John Wim Mar 12, 2020 2:54AM ET
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Great buying opportunity. Anyone remember all the houses that were auctioned off in 2008-20012? People who purchased those houses are sitting pretty now. Same thing now. The virus will be gone in one month.
Xin Zhang
Xin Zhang Mar 12, 2020 2:54AM ET
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check foreclosure rate and mortgage delinquencies
Kevin smarte
Kevin smarte Mar 12, 2020 2:51AM ET
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world needed a breather from growth
Ryan Reed
Ryan Reed Mar 12, 2020 2:51AM ET
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Fake growth! You fell for the pump and dump ponzi scheme of a stock market bubble we were in and now you are paying for it!
Chris Martin
Chris Martin Mar 12, 2020 2:51AM ET
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Save some money so you can have a hand in this and not just talk a "pile" -
Ben Dover
Ben Dover Mar 12, 2020 2:24AM ET
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Markets need to keep dropping and bleeding. Boomers voted for Trump it is only fair their retirement accounts feel the joy of his great leadership.
Jeremy Gautier
Jeremy Gautier Mar 12, 2020 2:24AM ET
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Trump try to save Usa
John Smith
John Smith Mar 12, 2020 2:24AM ET
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Yeah Ben. He made all this happen. Everyone said the President wasnt doing enough. Now hes taking some action. Now you dems arent happy about that. Hes trying to save your dum .... When will you wise up. I suspect NEVER.
william docauer
william docauer Mar 12, 2020 2:24AM ET
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Benny Dumer suffering from Trump derangement syndrome. Typical Dim/lib.
Chris Martin
Chris Martin Mar 12, 2020 2:24AM ET
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BenDover, if you'd have bought when the election occurred at 17k, you'd still be up significantly but it sounds like you held your position... Benover-
Ramm Batts
Ramm Batts Mar 12, 2020 1:59AM ET
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We want Free medical Bernie
First Last
First Last Mar 12, 2020 1:59AM ET
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nothing is free
Chris Martin
Chris Martin Mar 12, 2020 1:59AM ET
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LOL... instead of ramm batts, try Pounded Sand?
Remko Phone
Remko Phone Mar 12, 2020 1:24AM ET
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Trump is the king of kings, the Master. Wish we had leadership with a vision like that in Europe
Chris Martin
Chris Martin Mar 12, 2020 1:24AM ET
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But they are blind, we saved them from fascism and all around is wr hear fascism is good?
Abe Lincoln
Abe Lincoln Mar 11, 2020 10:31PM ET
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I'm not afraid of this msm H up over inflated V are you?
Abe Lincoln
Abe Lincoln Mar 11, 2020 10:30PM ET
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Thank you for your comment. Don't dare say anything about the msm being R for any or All of this.
Abe Lincoln
Abe Lincoln Mar 11, 2020 10:29PM ET
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The media is the Only reason with all their Scare tactics twisting and manipulating the Truth!The numbers are very low not the what if numbers ...so pathetic!
Chris Martin
Chris Martin Mar 11, 2020 10:29PM ET
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We hope you're correct sir but yes, the Swamp Media ******
Balaji Sudarsan
Balaji Sudarsan Mar 11, 2020 10:29PM ET
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why not waive off medical cost for those who is affected by the virus??? the biggest fear is the insurance cost will increase after lots of claims...
Balaji Sudarsan
Balaji Sudarsan Mar 11, 2020 10:26PM ET
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Repeat of another Monday grrrrrrrr... Relief measure should be proposed to fund those affected with paid sick leave.. People should stay calm..
Faread Samemy
Faread Samemy Mar 11, 2020 10:26PM ET
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margin calls are coming in
Keith Eland
Keith Eland Mar 11, 2020 10:24PM ET
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Just wow.
 
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