Black Monday in perspective Wall Street, panic does not abate

Futures contracts on the main New York indices point to a Wall Street opening down at least 4.5%, which could lead to a new activation of the circuit breakers. Paris, the CAC 40 fell 10.3% 3,694.13 points around 12:20 GMT. The benchmark has not dropped below 3,700 points since July 2013.

Frankfurt, Dax lost 8.97% and London, FTSE lost 6.75%.

The pan-European FTSEurofirst 300 index fell by 7.79%, the EuroStoxx 50 in the euro zone by 9.35% and the Stoxx 600 by 8.9%.

The largest central banks in the world have multiplied the announcements over the past 24 hours to try to reassure the financial world facing fears linked to the coronavirus, which has killed at least 6,509 people and has infected 169,444 in the world, according to the latest assessment by Reuters.

The US Federal Reserve notably lowered the Fed funds rate target by 100 basis points on Sunday and announced the purchase of $ 700 billion in securities. The Bank of Japan has decided to reinforce its asset repurchase policy and the European Central Bank, through the voice of Robert Holzmann, one of the members of its Board of Governors, has declared itself ready to intervene more in the sovereign debt if necessary.

But given the deterioration in the global economic outlook and the containment measures in place in many countries, these emergency measures do nothing to ease the anxiety of investors.

“The central banks will tackle the liquidity problem. But for the human, macroeconomic problem, there is nothing they can do. It is clear that the measures taken by the central banks, whatever they decide secondly, cannot prevent the economic crisis from being felt on a global scale, “said Kit Juckes at Socit Gnrale.

Among the illustrations of the brutal halt to economic activity caused by the pandemic, Chinese industrial production suffered its most severe contraction in the first two months of the year for 30 years and retail sales fell sharply, for the first time since these data are listed.

European Commissioner for the Internal Market, Thierry Breton, warned that the economy of the European Union would fall into recession this year. European finance ministers are due to hold a video conference on Monday and the G7 leaders will speak to each other at 2:00 p.m. GMT by phone.

VALUES IN EUROPE

On the equity side, the EuroStoxx 50 volatility index jumped to an all time high of 90.7, surpassing the levels reached at the height of the 2008 financial crisis.

The fall in markets affects all European sectors. Among those most affected, that of air transport and tourism, the most immediately affected by the fall in activity, plunged 14.5%. According to a note from JPMorgan, the airline industry could face the worst crisis in its history.

Air France-KLM, EasyJet, IAG and TUI lost between 16.4% and 34.2%.

Among the cyclical compartments, the European Stoxx sector and gas index fell 8.05%, that of raw materials fell by 8.86%, that of the automotive sector dropped 11.14% and that of the construction lost 12, 95%.

Airbus saw its market value drop by 17.79% and Renault by 19.28%. The banks BNP Paribas, Crdit agricole, Socit gnrale and Natixis lost between 13.4% and 17.7%.

IN ASIA

The Tokyo Stock Exchange did not manage to keep its early gains and ended down 2.46% after announcements from the Bank of Japan, which also ahead of schedule for its monetary policy meeting.

In mainland China, the CSI 300 large cap fell 4.3% and in Australia, the ASX 200 index fell 9.7%, its largest drop in history ever recorded.

RATE

On the bond market, the Fed’s announcements favored the decline in yields on American Treasury bonds: that of ten-year securities fell by around 20 basis points to fall around 0.7845%.

“The Fed has now done a lot in terms of rates and quantitative easing, but the question in the markets is whether monetary policy can solve the problems created by the coronavirus,” said John Davies of Standard Chartered.

The situation is more complicated in Europe, where risk aversion continues to widen the yield gap (spreads): while the German ten-year yield takes five basis points -0.523%, its French equivalent takes nine points 0.076% and Italian almost 17 points 1.977%.

“The development observed on the peripherals is mainly linked to the sentiment concerning the debt ratios of countries which, after years of quantitative easing and central bank support in the euro zone, are heading for a new major crisis if not worse than the previous one, “said Matt Cairns, Rabobank strategist.

CHANGES

On the foreign exchange market, the dollar lost ground after the rate cut decided by the Fed: the index measuring the fluctuations of the greenback against a benchmark basket fell 0.8%. The American currency fell by more than 2% against the yen.

The euro, for its part, gained 0.7% against the American currency and climbed back above 1.1180.

PTROLE

In the wake of the world stock markets, crude prices plunge again: the barrel of Brent drops by 10.13% 30.42 dollars and the light American crude loses 2.35 dollars, or 7.41%, to fall below 30 dollars.

MTAUX

The price of copper has declined to a lowest since November 2016, 5,274 dollars per ton, due to fears of a sharp slowdown in demand.

(Edit by Marc Angrand)

by Laetitia Volga



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