European stocks rise as Wall Street suffers another rout

A trader has his head in his hand on the floor of the New York Stock Exchange. (AP pic)

NEW YORK: European stocks gained Friday following the latest stimulus measures, but Wall Street equities plunged again on mounting worries over the coronavirus as oil prices suffered another drubbing.

Economists continued to slash their projections as more governments institute measures to clamp down on most commercial activity, except for essential services.

On Friday, New York Governor Andrew Cuomo ordered non-essential businesses to close and banned all gatherings, a dramatic escalation of mitigation steps after the nation’s most populous state California on Thursday directed its 40 million residents to stay at home.

The Dow tumbled another 4.6%, or around 915 points, to end at 19,173.98, below the level when President Donald Trump was inaugurated in January 2017.

The pummeling concluded Wall Street’s worst week since 2008.

“The rapidly spreading coronavirus has mobilised the nation’s policymakers, resulting in massive injections of monetary and fiscal stimulus not seen since 2008 and 2009,” Oxford Economics said in a note about the US.

“As menacing and damaging as the Great Recession was back then, it did not involve a daily mortality rate that is injecting a wartime mentality into the mindset of the nation and its leaders.”

Longer impact

More analysts now view the economic hit from the virus as a drag for the foreseeable future.

“The damage is not likely to pass in a month or two,” FHN Financial said in a note. “Increasingly, it appears there will be a sharp drop in global activity, followed by a period of significant weakness lasting at least two quarters, followed by a partial recovery.

“In other words, for those savvy to the alphabet soup vocabulary of recession analysis, an L-shaped recession rather than a V-shaped recovery.”

Earlier, European stocks enjoyed a rare up day after the European Central Bank and EU took unprecedented measures to prop up their economies as confinement measures to slow the spread of the coronavirus causes massive disruptions to businesses.

Paris ended the day with a gain of 5% and Frankfurt nearly 4%.

London’s stock market won only 0.8% as an anticipated new British state stimulus plan failed to materialise.

On Friday, the ECB took its latest measure, freeing up banks to allow them to issue as much as €1.8 trillion in fresh loans.

That follows a €750 billion stimulus package designed to help virus-wracked economies by buying extra government and corporate bonds.

Meanwhile, the EU moved to suspend its strict rules on public deficits to allow governments to open the money taps to face the coronavirus pandemic.

Oil markets failed to extend a rebound following a directive from US President Donald Trump to top up the Strategic Petroleum Reserve to its maximum capacity by buying a total of 77 million barrels from US producers.

US oil prices plunged 11% to US$22.53 a barrel, taking its weekly loss to 30% in a market pressured by crashing demand and a surge in supply due to a war for market share between Russia and Saudi Arabia.