Dubai: Markets tumbled worldwide even as the US central bank rushed to plug the fiscal black hole formed by widespread panic among investors of a rapidly-spreading pandemic.
Despite a decision from the US Federal Reserve to cut rates by 100 basis points on Sunday night, markets seem to be ignoring the global coordinated response from central banks as sell-off deepens.
Despite whipping out the big guns, the Fed’s action is falling short of being the decisive backstop for markets, Vishnu Varathan of Mizuho Bank wrote in a note. “Markets might have perceived the Fed’s response as panic, feeding into its own fears.”
Indices plunge all over
The Dow Jones Industrial Average index on Wall Street was indicating a drop of over 1,041 points at open, along with significant declines at both S&P500 and Nasdaq indices – which are all seen opening down over 4 per cent.
This followed a dizzying week in which the Dow twice fell by more than 2,000 points and also recorded its biggest point gain ever - 1,985 points on Friday. The bull market that began in 2009 in the depths of the financial crisis came to an end. Europe markets saw similar volatility.
The Stoxx Europe 600 Index fell as much as 9.1 per cent to the lowest since November 2012. The benchmark lost 18 per cent last week in its worst drop since the 2008 financial crisis. Australia’s market was down 7.5 per cent, leading major markets in the region.
Asian markets were mostly lower in Monday trading. Hong Kong was down 2.2 per cent. In mainland China, the Shanghai market was down 0.6 per cent. South Korean shares were down 1.6 per cent.
“If the Fed’s dramatic easing measures were intended to support global markets, then I can’t imagine the carnage we would have faced today without them,” wrote Craig Erlam, senior market analyst at OANDA Europe.
Although the move from the Fed is part of a global response from central banks meant to curb growing economic uncertainty caused by the coronavirus pandemic, financial markets across don’t seem impressed by the level of stimulus being pumped into the economy by central banks.
However, some analysts still stuck to their stance that an end to all this chaos may be in sight.
“We remain of the view that beyond short-term panic from weak hands, prospects are starting to improve in a decisive way for risk assets altogether,” said Stephane Barbier de la Serre, strategist at Makor Securities.
If more governments follow suit, the global economy may have a good chance of a strong recovery later in the year and all the toilet roll panic buying will be a thing of the past, Erlam said.
“The flip side of that though is that if the darkest hour is just before the dawn, then we may only currently be in late evening,” Erlam added. “A true test of investors risk tolerance is yet to come.”
UAE markets plunge continue
Indices on Dubai and Abu Dhabi bourses continued to remain pressured on Monday, with losses especially widening rapidly towards the end of trading.
The Dubai Financial Market (DFM) index dropped 6.1 per cent or 120.66 points to 1,842.6, while the Abu Dhabi Securities Exchange (ADX) plunged 7.8 per cent to 3,548.04 points.
With over 15,000 virus cases in the Middle East, Gulf Arab states have expanded measures to contain the spread of the infection with Abu Dhabi’s bourse closing trading halls and Dubai shuttering cinemas, gyms and arcades. Kuwait and Saudi Arabia have halted international passenger flights.
The region’s top bourse benchmark – Saudi Arabia’s Tadawul – dropped 4.3 per cent, while the index was down 1.4 per cent in Bahrain. Kuwait’s Premier Market Index fell 5 per cent.
Worsening investor sentiment in the region was the plunge in oil prices. Brent crude lost $3.2 to $32.2 per barrel, tumbling 8.9 per cent. Benchmark US crude plunged 6.9 per cent, or $2.21, to $29.52 per barrel in electronic trading on the New York Mercantile Exchange.