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Global Market Report - 17 March

Lex Hall  |  17 Mar 2020Text size  Decrease  Increase  |  
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Australia

Investors are bracing for another wild day on the share market after US equities tanked overnight following the worst loss in history for Australian stocks.

At 7am Sydney time the SPI200 futures contract was down 209 points, or 4.14 per cent, at 4839 points, suggesting Australia’s volatile market will plunge at the open.

NAB’s morning call note says global markets were far from impressed with measures to counteract the economic impacts of the coronavirus on Monday - despite the Fed Reserve cutting interest rates by a full one per cent, and the return of quantitative easing.

Global markets plunged overnight with the Dow Jones closing down 13 per cent. The S&P 500 lost 8.61 per cent and the Nasdaq Composite dropped 9.02 per cent.

Australia’s benchmark S&P/ASX200 finished down 537.3 points, or 9.7 per cent, at 5002 on Monday, eclipsing an 8.3 per cent drop back on 10 October 2008 during the height of the global financial crisis. The dive put the index back to levels last seen in April 2016.

The ASX200 has lost 30.5 per cent of its value in three and a half weeks of tumultuous trading since 20 February.

The Aussie dollar was buying US61.24 cents at 7am, up from Monday’s US60.96 cents, which was its lowest level against its US counterpart since 2003. 

Asia

China stocks fell on Monday as grim data highlighted the extent of the coronavirus’ impact on the world’s second-largest economy, and another emergency rate cut by the  US Federal Reserve failed to ease fears about the pandemic’s fallout.

The CSI300 index fell 1.4 per cent to 3,839.06 by the end of the morning session, while the Shanghai Composite Index lost 0.6 per cent to 2,871.49.

In Hong Kong, the Hang Seng index dropped 2.2 per cent, to 23,507.13, while the Hong Kong China Enterprises Index lost 2.6 per cent, to 9,396.54.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 3.18 per cent, while Japan’s Nikkei index was down 0.32 per cent.

Europe

China stocks fell on Monday as grim data highlighted the extent of the coronavirus’ impact on the world’s second-largest economy, and another emergency rate cut by the  US Federal Reserve failed to ease fears about the pandemic’s fallout.

The CSI300 index fell 1.4 per cent to 3,839.06 by the end of the morning session, while the Shanghai Composite Index lost 0.6 per cent to 2,871.49.

In Hong Kong, the Hang Seng index dropped 2.2 per cent, to 23,507.13, while the Hong Kong China Enterprises Index lost 2.6 per cent, to 9,396.54.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 3.18 per cent, while Japan’s Nikkei index was down 0.32 per cent.

North America

US stocks fell sharply on Monday as the Federal Reserve’s drastic move to cut interest rates to near zero fuelled anxiety over the extent of economic damage from the coronavirus pandemic.

The Fed’s second emergency interest rate cut in less than two weeks and its pledge to purchase more than US$700 billion in assets came late on Sunday, ahead of its scheduled policy meeting on Tuesday and Wednesday. It added to the alarm about the pandemic that has paralysed parts of the global economy and squeezed company revenue.

 US markets should stay open despite turmoil, says securities regulator

Investors are worried over how effectively policymakers will be able to mitigate the economic damage from the spreading virus.

The market is down despite the Fed’s move because “this is a different type of crisis. Lower rates will not create demand when people are home,” said Solita Marcelli, deputy chief investment officer for the Americas at UBS Global Wealth Management.

“But this doesn’t mean what the Fed has done is futile. Lower rates are a precondition to other policies,” she said. “So I think this has to be done, but it’s understandable the way the market is reacting.”

The benchmark index slid as much as 11.4 per cent early in the session, shedding about $2 trillion in market value, before bargain-hunting helped the main indexes claw back some losses.

Trading on Wall Street's three main stock indexes was halted for 15 minutes shortly after the open as the S&P 500 index plunged 8 per cent, crossing the 7 per cent threshold that triggers an automatic cutout.

Rate-sensitive financial stocks tumbled more than 11 per cent, leading declines among the major S&P sectors. The sector also came under pressure after the big  US banks halted their share buy-backs.

Energy stocks also fell sharply along with oil prices, and the S&P 500 technology index was down more than 9 per cent.

Heavyweights Apple, Microsoft Corp and Facebook were among the biggest drags on the S&P 500.

The Dow Jones Industrial Average fell 2,120.11 points, or 9.14 per cent, to 21,065.51, the S&P 500 lost 233.51 points, or 8.61 per cent, to 2,477.51 and the Nasdaq Composite dropped 710.35 points, or 9.02 per cent, to 7,164.52.

Wall Street’s fear gauge jumped 21.15 points to 78.98.

The markets should stay open despite the intense volatility, the head of the  US securities regulator said, quashing speculation that the government might shut down the country’s exchanges to stop the plunge in stock prices.

Bars, restaurants, theatres and movie houses in New York and Los Angeles were ordered shut, and  US states pleaded with the Trump administration to coordinate a national response to the outbreak.

Nike, Lululemon Athletica and Under Armour said they would close stores in the US and some other markets, dragging the S&P 500 retail index sharply lower.

The S&P 1500 airlines index slumped after United Airlines booked $1.5 billion less revenue in March and warned employees that planes could be flying nearly empty into the summer.

Adding to worries, severe virus containment measures sent China’s factory production tumbling at its fastest pace in three decades.

 

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