In Brief

Global markets plunge as investors fear ‘cataclysmic recession’

Wall Street suffers worst day since 1987 despite efforts to steady financial markets

Stock markets sunk yesterday despite central banks announcing a co-ordinated effort to ease the effects of the coronavirus.

London’s FTSE 100 index dropped more than 4%, with other major European markets also suffering declines. 

On Wall Street, US markets plunged more than 7%, prompting an automatic suspension of trade in the minute after markets opened.

The Guardian reports that “mounting concerns over a possible global recession” triggered the falls, adding that they come “despite dramatic action taken by the US central bank”. 

The Federal Reserve “slashed interest rates to near zero in an unprecedented attempt to shore up the US economy”, the paper says.

In what The New York Times describes as a series of “extraordinary steps”, the Fed also announced that it would expand its balance sheet by at least $700bn (£565bn) in the coming weeks to help stabilise market confidence.

Investors now fear that the global economy “could experience a downturn rivaling the cataclysmic recession after the financial crisis a decade ago”, the paper adds.

–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Get your first six issues for £6–––––––––––––––––––––––––––––––

Dharshini David, global trade correspondent for the BBC, writes: “Sunday’s extravaganza by the Fed showed how central banks can go big. But interest rate cuts are of limited use; they won't tempt customers to go out and spend in Marseille or New York when the bars are closed and flights cancelled.”

David Madden, a market analyst at CMC Markets, said that while central bankers were trying to calm the markets, “in reality it is having the opposite effect”.

“The radical measures have sent out a very worrying message to dealers, and that is why they are blindly dumping stocks.”

Paul Markham, global equities portfolio manager at the asset manager Newton Investment Management, said: “As the last few weeks have unfolded there has been a growing fear that the world faces a perfect storm. A strong nerve will be required and it may well get darker before we see the light.”

“Things are getting ugly,” added Neil Shearing, chief economist at the consultancy Capital Economics. 

“History suggests that equity markets are only likely to bottom out when it becomes clear that the flow of new cases of the virus has peaked. Until this happens, we should expect stock markets to remain under pressure.”

Recommended

Government accused of ‘flawed decisions’ based on ‘misleading’ Covid data
NHS staff wearing PPE treat patients suffering from Covid-19
Behind the scenes

Government accused of ‘flawed decisions’ based on ‘misleading’ Covid data

Quiz of The Week: 24 - 30 July
A traveller walks through an airport
Quizzes and puzzles

Quiz of The Week: 24 - 30 July

Flash floods, Tunisian turmoil and rich racing
Flash floods in London in July 2021
Podcast

Flash floods, Tunisian turmoil and rich racing

The best places to survive the collapse of society
View from Titterstone Clee Hill
Why we’re talking about . . .

The best places to survive the collapse of society

Popular articles

Why your AstraZeneca vaccine may mean no European holidays
Boris Johnson receives his second dose of the Oxford-AstraZeneca vaccine
Getting to grips with . . .

Why your AstraZeneca vaccine may mean no European holidays

‘Wobbling’ Moon will cause worldwide flooding, Nasa warns
Flooding in Florida after Hurricane Irma hit in 2017
Why we’re talking about . . .

‘Wobbling’ Moon will cause worldwide flooding, Nasa warns

What next as homes raided in search for Hancock affair whistle-blower?
Matt Hancock leaving No. 10 with Gina Coladangelo in May 2020
The latest on . . .

What next as homes raided in search for Hancock affair whistle-blower?

The Week Footer Banner