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Markets in turmoil over lockdown fear

Dubai - Equity markets in the Middle East, Asia, Europe and the US extended losses, driven down by growing coronavirus cases, uncertainty about global economy, fears of recession and fall in oil prices.

It's the second consecutive Black Monday this month as financial markets across the globe witnessed bloodshed yet again after central banks' efforts to calm panicked investors failed miserably.
Equity markets in the Middle East, Asia, Europe and the US extended losses, driven down by growing coronavirus cases, uncertainty about global economy, fears of recession and fall in oil prices.
S&P 500 companies lost more than $2 trillion in value in the first few minutes of trading as investors panicked about the mounting damage from the coronavirus pandemic on the global economy.
Trading in US stocks was automatically halted for a mandatory 15 minutes after the Dow Jones Industrial Average tumbled almost 10 per cent while Nasdaq Composite tumbled over six per cent over fears of a looming recession.
The S&P 500 index, which hit the circuit breaker twice last week after a crash in oil prices and unexpected travel restrictions from Europe, has now lost nearly $6 trillion since its record closing high in mid-February.
In late morning trade, the S&P 500 fell 6.2 per cent, shedding about 25 per cent since setting its record February 19. The Dow Jones Industrial Average lost 1,440 points, or 6.2 per cent, to 21,757, and the Nasdaq was down 6.5 per cent.
Gulf markets slip
The Abu Dhabi and Dubai bourses led the GCC markets decline, falling 7.83 per cent and 6.14 per cent, respectively. Saudi Arabia and Kuwait indexes plummeted 5.21 per cent and 4.97 per cent, respectively, as investors blamed Covid-19 for the decline. Qatar bucked the trend for the second consecutive day, rising 1.45 per cent on Monday.
Ziad Daoud, chief Middle East economist at Bloomberg Economics, said the GCC, like the rest of the world, is experiencing the economic fallout of the coronavirus.
"Interest rate cuts, as well as liquidity injections by the central banks in Saudi Arabia and the UAE, are helpful. They assist viable businesses that might be struggling now with lockdowns and social distancing. But monetary easing is limited by the currency peg and the fact that interest rates have little room to fall further," said Daoud
He noted that fiscal policy should do most of the heavy lifting as it should target individuals and businesses that are generally solvent but experiencing difficulties in the current unusual environment. "Yet even fiscal policy is constrained by the sharp drop in oil prices," he said.
Dozens of central banks across announced interest rate cut and quantitative easing measures to support economies and financial markets to overcome Covid-19 crisis.
"The world is facing a pandemic. These are extraordinary times, and we need extraordinary measures. However, these measures have failed to calm to the markets and once again we have started the week in a major turmoil. This is because cutting the interest rate to zero and restarting the quantitative easing package has sent shockwaves," said Naeem Aslam, chief market analyst at Ava Trade.
In Asia, Pakistan Stock Exchange declined 2,397 points in Monday's session which is the highest ever decline in terms of points. The market closed at 33,664 points, declining 6.59 per cent. It was the highest decline in percentage terms since May 20, 2002.
Australia was the worst hit stock market in the region, plunging nearly 10 per cent, followed by nearly eight per cent slump in Indian shares, 6.6 per cent decline in Pakistani index and over five per cent drop in Singapore shares.
Markets traded in negative territory in In Europe as well. The FTSE-100 index slumped six per cent, Frankfurt's DAX 30 plummeted 7.1 per cent while both Paris and Milan indexes lost 8.4 per cent in early trade.
Rick Lacaille, global chief investment officer for State Street Global Advisors, says global authorities now have an unprecedented need to work together as they explore what else they can do to keep the system working.
"They will be looking at things like targeted security purchases, and relaxation of regulatory constraints to help ensure trading. But more than that we might very quickly reach a position where a coordinated fiscal response from the world's governments is vital," Lacaille said. - waheedabbas@khaleejtimes.com