(Paris) Distress warning: from Sydney to New York via Paris, the spread of the new coronavirus around the world once again capsized the world stock markets on Monday, now convinced that a recession is inevitable.
Posted on March 16, 2020 at 6:47 am
Updated at 14:24
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Faced with the exponential rise in the number of contaminations, massive lockdowns and fears of a global contraction in growth, markets have fallen one after another, oblivious to the efforts of central banks.
After the historic losses of last week, the Australian Stock Exchange opened the week with an unprecedented drop of 9.7%. Hong Kong, Shanghai, Shenzhen, Tokyo: everywhere in Asia the decline was evident.
Same story in Europe, where the Paris Stock Exchange ended with a plunge of 5.75%, Frankfurt of 5.31%, London of 4.01%. Madrid (-7.88%), Milan (-6.10%) and Brussels (-7.22%) experienced even more spectacular falls.
“The market has completely adjusted its expectations, considering that in any case, we are not able to manage the crisis from an epidemic point of view,” Christopher Dembik, head of economic research at Saxo, stressed to AFP. Bank.
“Even if the political or monetary responses are certainly appropriate, the problem is that nobody has visibility on the health crisis, its duration and especially on the duration of the recession”, he added.
The stock markets of the Gulf countries, very dependent on the energy sector, also collapsed Monday, with the exception of Qatar, swept away by the fall in oil prices. Black gold, weighed down by an overabundance of offers on the market, for lack of agreement between major producing countries, fell to its lowest level since February 2016 on Monday after another plummet.
Salvation did not come from across the Atlantic, where Wall Street suffered one of the worst sessions in its history, the Dow Jones plunging 12.93%, or nearly 3,000 points, and the NASDAQ 12.32% .
For the third time in less than a week, trading was suspended soon after trading began, when the S&P 500 plunged 7%. The collapse of the broader Wall Street index automatically triggered a quarter-hour trade-off mechanism, supposed to allow market participants to come to their senses.
“Recession almost guaranteed”
“The markets understand that a recession is almost guaranteed. The authorities are helping by injecting money but cannot stop it, ”observed Jasper Lawler, analyst for London Capital Group.
The American Central Bank (Fed) on Monday announced a $ 500 billion money market operation, the day after a sharp drop in its rate to 0% -0.25% and an injection of liquidity of 700 billion dollars.
The last time the Fed lowered its rates to such a level dates back to December 2008, at the heart of the so-called “subprime” financial crisis.
At the same time, the Fed, the European Central Bank and the central banks of Japan, United Kingdom, Canada and Switzerland have relaxed the conditions under which they exchange currencies with each other, in order to be able to guarantee a sufficient supply of the markets in dollars. .
The Central Bank of Japan (BoJ) has significantly increased its annual targets for some of its asset buybacks. Its annual objective of buying back funds traded on the stock exchange has thus been doubled to 12 trillion yen (101 billion euros).
In addition to the collapse of financial markets, economic statistics have collapsed.
These turned out to be significantly worse than expected in China, the world’s second-largest economy. Industrial production contracted for the first time in nearly 30 years.
The Chinese Central Bank however lowered the bank reserve requirement rate on Monday, injecting 550 billion yuan (70.6 billion euros) to support the economy.
But that is not enough to support the rating because “the coronavirus continues to spread across the planet and the demand for consumer goods is declining,” observed broker Guangzhou Wanlong Securities.
Manufacturing activity in the New York area fell in March to the lowest since the 2009 financial crisis.
The 27 EU finance ministers, meeting by video conference on Monday, also tried to respond to the devastating consequences of the coronavirus crisis. An extraordinary meeting of the 27 EU leaders is also scheduled for Tuesday to follow up on the response to the pandemic.
COVID-19 has killed more than 7,000 people worldwide, including more than 2,000 in Europe, which has now become, according to the World Health Organization, the epicenter of the disease.
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