Global stocks fell Wednesday after President Trump issued a stark new warning on the spread of the novel coronavirus in the U.S., reviving concerns about the potential damage to the world’s largest economy.
Futures tied to the Dow Jones Industrial Average dropped 3%, suggesting that blue-chip stocks will decline a day after U.S. equities closed out their worst quarter since the financial crisis. European stocks also declined, with the pan-continental Stoxx Europe 600 index retreating 3%.
Mr. Trump warned that the U.S. could face as many as 240,000 deaths as he asked Americans to brace for an unprecedented crisis in the days ahead. The nation has more confirmed cases than any other country, with more than 189,000 infections, and projections from the University of Washington show the illness could result in 2,214 deaths a day at the peak in two weeks.
“In the U.S., we’re at the beginning of a downturn,” said Steven Englander, global head of G-10 foreign-exchange research and North America macro strategy at Standard Chartered Bank. “We’re likely to see more unemployment, and the early bottom could come in May, but that is very speculative. For that to happen, we need a lot of good luck and serious implementation of economic and health-care policy.”
While the stimulus packages are good for the economy, and would help American employees get through the next two months, there might be a need for “trillions more,” Mr. Englander said.
On Tuesday, Mr. Trump called for a new infrastructure-focused spending bill worth $2 trillion.
In commodities, Brent crude, the global oil benchmark, dropped 5.1% to $24.99 a barrel after an agreement between major oil-producing nations limiting the output lapsed overnight. Saudi Arabia is preparing to flood oil markets as early as Wednesday as the kingdom forges ahead with a price war with Russia. Brent crude has plunged over 62% so far this year.
As investors looked to assets that are perceived to be the safest, the yield on the 10-year U.S. Treasury note ticked down to 0.622%, from 0.691% Tuesday.
The Federal Reserve’s decision Tuesday to launch a temporary lending facility that would allow foreign central banks to convert their holdings of Treasury securities into dollars would help alleviate strains in global markets, Mr. Englander said. The ICE Dollar Index, which tracks the dollar against a basket of currencies, ticked up 0.7%.
In Europe, banks and finance companies were among the worst performing stocks. Some European lenders said late Tuesday that they would shore up capital by canceling or delaying dividend payments amid concern about their ability to absorb a potential rush of bad loans as households and companies are impacted by the pandemic. Dividends and share buybacks have been a main driver of banking stocks across the region in recent years.
Shares in HSBC Holdings tumbled 8.8%, while Standard Chartered fell 6.8%. The two lenders were among four banks that said on Tuesday they would cancel unpaid 2019 dividends at the Bank of England’s request.
In Asia, Japan’s Nikkei 225 lost 4.5% and Hong Kong’s Hang Seng closed 2.2% lower. Meanwhile, Australia’s ASX 200 gained 3.6%.
Later in the day, the Institute for Supply Management’s March manufacturing survey could provide clues about how disruptions to supply chains and business shutdowns are affecting manufacturing activity in the U.S.
President Trump has called for a new infrastructure-focused spending bill.
Photo: mandel ngan/Agence France-Presse/Getty ImagesWrite to Frances Yoon at frances.yoon@wsj.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com
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2020-04-01 09:50:01Z
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