(Bloomberg) — U.S. plunged as investors fled risk assets amid the mounting economic toll of the coronavirus outbreak. Treasuries surged despite dramatic moves from the Federal Reserve and other central banks.
The S&P 500 fell 10% as of 9:46 a.m. in New York, bringing into play the 13% circuit breaker that would pause trading for 15 minutes. The index plunged 8% at the open and trading halted for 15 minutes.
Hyper-turbulent financial markets started the week back in risk-off mode, with investors trying to assess the likely extent of the economic damage after countries around the world moved to combat the virus spread by virtually shutting down social activity.
“The market’s in panic mode,” Chris Rupkey, chief financial economist for MUFG Union Bank, said in a phone interview. “The move overnight was a shock and the market isn’t taking it as the Fed officials riding to the rescue. They’re taking it as ‘get out of the way, look out below, this could be really, really bad.’”
Here are some of Monday’s key moves across major assets:
- The S&P 500 sank, wiping out all of Friday’s final-hour rally. The Dow Jones Industrial Average plunged 9.7% before being halted.
- A measure of fear in U.S. stocks surged to the highest since 2009.
- A regional manufacturing index sank the most on record.
- Brent crude tumbled below $30 a barrel for the first time since 2016.
- Treasury yields plunged all across the curve, with that of benchmark 10-year notes retreating more than 33 basis points at one point before trimming the decline.
- Shares tumbled in Asia and Europe, where the continent is now reporting more new virus cases each day than China did at its peak as more countries lock down. The Stoxx Europe 600 Index plunged almost 10% led by travel and construction shares.
- The yen surged, the Swiss franc rallied and the dollar fluctuated.
- Oil resumed losses. Gold failed again to capitalize on the rush to havens and reversed an earlier gain to tumble.
- Bonds declined across most of Europe, where a measure of market stress hit levels not seen since the 2011-2012 euro crisis.
The Fed and other central banks have dramatically stepped up efforts to stabilize capital markets and liquidity, yet the moves have so far failed to boost sentiment or improve the rapidly deteriorating global economic outlook. An International Monetary Fund pledge to mobilize its $1 trillion lending capacity also had little impact in markets.
The problem is, bad news keeps stacking up. The New York Fed’s regional gauge of factory activity plunged. Ryanair Holdings Plc said Monday it will ground most of its European aircraft while a consultant said the pandemic will bankrupt most airlines worldwide before June unless governments and the industry step in. Nike Inc. and Apple Inc. announced mass store closings.
“In normal circumstances, a large policy response like this would put a floor under risk assets and support a recovery,” Jason Daw, a strategist at Societe Generale SA in Singapore, wrote in a note. “However, the size of the growth shock is becoming exponential and markets are rightfully questioning what else monetary policy can do and discounting its effectiveness in mitigating coronavirus-induced downside risks.”
The yen rebounded from Friday’s plunge after the Fed and five counterparts said they would deploy foreign-exchange swap lines. Australian equities fell almost 10%, the most since 1992, even after the Reserve Bank of Australia said it stood ready to buy bonds for the first time — an announcement that sent yields tumbling. New Zealand’s currency slumped after an emergency rate cut by the country’s central bank.
Meanwhile, China reported Monday that output and retail sales tumbled in the past two months.
These are the main moves in markets:
Stocks
- The Stoxx Europe 600 Index fell 9.6% as of 8:39 a.m. New York time.
- Futures on the S&P 500 Index dipped 4.8%.
- The U.K.’s FTSE 100 Index fell 7.5%.
- The MSCI Emerging Market Index declined 5%.
- The MSCI Asia Pacific Index decreased 3.7%.
Currencies
- The Bloomberg Dollar Spot Index dipped 0.1%.
- The euro gained 0.8% to $1.1194.
- The British pound increased 0.2% to $1.2308.
- The Japanese yen strengthened 1.7% to 105.80 per dollar.
Bonds
- The yield on two-year Treasuries sank 15 basis points to 0.34%.
- The yield on 10-year Treasuries declined 19 basis points to 0.77%.
- The yield on 30-year Treasuries declined 13 basis points to 1.40%.
- Germany’s 10-year yield climbed three basis points to -0.52%.
- Britain’s 10-year yield fell three basis points to 0.382%.
Commodities
- West Texas Intermediate crude fell 8.6% to $29 a barrel.
- Gold weakened 4.3% to $1,463.30 an ounce.
- Iron ore sank 2.5% to $86.10 per metric ton.
— With assistance from Cormac Mullen, Gregor Stuart Hunter, Andreea Papuc and Adam Haigh.
