Equities in freefall after Wall St, Europe implode on virus fears

The US stock market had its biggest drop since the 1987 Black Monday crash. (AP pic)

HONG KONG: Asian equities tumbled Friday, extending a global rout that saw markets experience their worst day in decades as fears of a worldwide recession caused by the coronavirus pandemic wiped trillions off valuations.

Shellshocked investors fled for the hills as governments across Europe and in the United States struggled to get a grip on the crisis that has swept the planet and shut communities down.

Central bank moves to support financial markets have also failed to staunch the bloodletting, while Donald Trump’s decision to shut the US border to European travellers added to the panic.

“Markets remain in a freefall as uncertainty persists with no reliable anchor which can create near-term stability,” Ben Emons, at Medley Global Advisors in New York, said.

However, after a morning session wipeout across the region, most markets clawed back losses, even if they were still in negative territory as traders picked up bargain-basement stocks.

Tokyo, which fell as much as 10% at one point, ended down 6.1%, while Hong Kong was 1.6% lower in the afternoon having plunged around 7% earlier.

Seoul, Bangkok, Manila and Singapore all managed to cut their losses by more than half, while Mumbai edged higher just hours after a trading halt kicked in because it had fallen more than 9%.

Shanghai was down less than 1% as the number of new cases in China, the centre of the outbreak, shrinks and people slowly return to work in the worst-hit areas.

Futures also pointed to a bounce in European and US markets later in the day.

But the standout was Sydney, which swung more than 12% to end 4.4% higher.

“Despite continued uncertainty over the coronavirus spread, some market players with more optimistic outlooks will see current levels as good buying opportunities for medium and long term plays,” Nick Twidale, at IC Markets in Sydney.

Forager Funds’ Steve Johnson described the day’s trade as “completely and utterly nuts”.

Even oil prices, which have been ravaged this week, were more than 2% higher after a quick intra-day turnaround.

Still, trading floors remain nervous places following a virtual implosion on Wall Street and in Europe.

The Dow lost 10% in its worst session since 1987, while London also had its worst day since that year. Frankfurt had its blackest day since 1989, the year the Berlin Wall fell, while Paris suffered its biggest one-day loss on record.

Analysts said Trump’s ban on travel from Europe deeply rattled investors, and measures intended to shore up business and markets were proving insufficient.

The New York Federal Reserve announced measures to inject an additional US$1.5 trillion into financial markets this week and launch a bond-buying programme, while the European Central Bank unveiled emergency efforts but did not include an interest rate cut.

Resorting to boxes under the bed

“The turmoil in markets has moved up another notch over the past 24 hours with President Trump’s European travel ban and underwhelming stimulatory measures adding more fuel to the fire of uncertainty, instead of providing a dose of reassurance,” wrote National Australia Bank’s senior FX strategist Rodrigo Catril.

“New containment measures to slow the spread of Covid-19 have increased the prospect of a severe global economic growth downturn,” he added.

The crisis has hit the travel industry particularly badly as new restrictions prompt mass cancellations, while sporting events have been scrapped globally and everything from museums to Disney theme parks have shut.

“In mere weeks, the market has shifted gears from a transitory health scare to a full-blown global recession,” said AxiCorp market strategist Stephen Innes.

“Global supply chains are no longer just ‘disrupted’ but are now in the process of shutting down completely,” he added.

Markets have also been shaken by an oil price war between Saudi Arabia and Russia, compounded by fears that travel restrictions will further dampen energy demand.

On currency markets, the dollar surged against high-yielding, riskier units and hit a record high against the Indian rupee while the South Korean, Australian and Canadian dollars, Thai baht, and South African rand were all more than 1% down.

The greenback was up more than 2% on the Indonesian rupiah, while it also rose against the yen despite the Japanese unit’s safe-haven position.

Jeffrey Halley, senior market analyst at Oanda, added: “Most worryingly, US bond yields rose… when really the situation was ripe for a mass stampede to the US Treasury market driving down yields.

“That suggests two things: One, credit is tightening – a gruesome scenario for business. Two, investors are now moving to the ultimate haven, hoarding cash in boxes under the bed.”