The stock market’s latest plunge pulled global equities into a bear market with traders taking fright at the potential economic damage of the coronavirus and US President Donald Trump stopping short of offering a detailed rescue package.
The MSCI All-Country World Index fell as much as 2.3%, the lowest intraday level since January 2019. The gauge is 20% below its record closing high of 12 February. The sell-off has wiped out over US$11-trillion in the index’s capitalisation.
European equities followed Asian stocks lower as investors fled risky assets amid concerns about the cost to earnings and global growth from the spreading coronavirus. The US has restricted travel from Europe, and underwhelming stimulus measures disappointed investors.
“There is no place to hide aside from cash,” said Alberto Tocchio, chief investment officer at Colombo Wealth in Lugano, Switzerland. “Meltdown phase is continuing with an exceptional strong selling pace. What seems to be very clear is that if this virus continues to spread and containment measures are prolonged and extend further, that’s clearly going to have more of an impact on global growth and earnings.”
Investors are looking for concrete and significant stimulus measures that could limit the fallout from the coronavirus. So far, markets have brushed off interest rate cuts from the US Federal Reserve and Bank of England.
‘Fast and brutal’
“The sell-off is fast and brutal,” said Ulrich Urbahn, head of multi-asset strategy and research at Joh Berenberg Gossler & Co. “WHO declared a global pandemic and on fiscal measures, Trump did not add much — investors were clearly disappointed.”
Energy shares have been the worst-hit globally since the 12 February record high following the eruption of a price war and the collapse of crude. The MSCI ACWI Finance and Materials indexes are the next worst.
Berenberg is avoiding energy, basic materials and banking sectors, while preferring quality growth stocks.
The pandemic has pushed government’s in Europe to come out with fiscal aid packages. Italian Prime Minister Giuseppe Conte’s administration is ready to spend as much as €25 billion on stimulus measures and the UK on Wednesday announced total fiscal stimulus of £30-billion. — Reported by Ksenia Galouchko, (c) 2020 Bloomberg LP