Stock markets tumbled across the globe and oil prices slumped Thursday after President Donald Trump banned all travel from mainland Europe to the United States for a month to fight the coronavirus pandemic, ramping up fears of a worldwide recession.
With the market panic having already wiped away more than $11 trillion in global value, the head of the World Health Organization said the COVID-19 outbreak “is a controllable pandemic” if countries stepped up measures to tackle it.
“We are deeply concerned that some countries are not approaching this threat with the level of political commitment needed to control it,” WHO director-general Tedros Adhanom Ghebreyesus told diplomats in Geneva, according to a statement.
On Wall Street, the Dow tumbled 7.4 percent in the first minute of trading, having fallen 5.9 percent on Wednesday.
The FTSE in London was down 8.1 percent.
The stock markets in Sydney, Tokyo, and Hong Kong all suffered significant losses as well.
Manila crashed nearly 10 percent – sparking a brief trading halt – after it emerged Philippines President Rodrigo Duterte would undergo a precautionary test for the virus.
In the Gulf, Saudi dumped 3.0 percent in value, Dubai tumbled 8.0 percent and Qatar shed 4.5 percent.
“Taking the view that the president’s travel ban has only further heightened the likelihood of a global recession… investors fled,” said Connor Campbell, market analyst at Spreadex trading group.
DOW ENTERS BEAR MARKET TERRITORY: The dollar weakened and the Dow Jones industrials entered bear market territory on Wednesday. Markets are responding to mounting worries about the global economy after WHO declared the coronavirus a pandemic https://t.co/EDWIYuOv4y
— NowThis (@nowthisnews) March 12, 2020
The carnage on stock markets spread to Europe, with losses accelerating in Paris and Frankfurt, which both fell more than 10 percent after the ECB unveiled a series of measures to shore up the eurozone economy, but it did not lower interest rates like central banks elsewhere.
The European Central Bank ramped up its super-cheap bank lending program, vowing to “support bank lending to those affected most by the spread of the coronavirus, in particular small and medium-sized enterprises”, as well as spend an additional 120 billion euros ($135 billion euros) this year buying up government and corporate bonds.
“The crux of the matter … is that all of the efforts being made to curtail the spread of the coronavirus are going to produce negative economic outcomes that will weigh far and wide on earnings prospects since they are also curtailing consumer and business spending,” said market analyst Patrick J. O’Hare at Briefing.com
Massive Negative Signal
“Travel restrictions equal slower global economic activity, so if you need any more coaxing to sell… after a massively negative signal from trading in US markets it just fell in your lap,” said AxiCorp’s Stephen Innes.
The coronavirus outbreak has left virtually no sector untouched, though travel and tourism have been particularly hard-hit as countries institute travel bans and quarantine requirements, with Italy in a country-wide lockdown.
The coronavirus market crash has wiped off $11.3 trillion from global valuations as of the end of Wednesday, according to Howard Silverblatt, a senior analyst at S&P Dow Jones Indices.
The number of coronavirus cases across the globe has risen to more than 126,000 with 4,600 deaths, according to Johns Hopkins University.
Elsewhere Thursday, oil prices were hammered, with benchmark Brent North Sea crude losing more than seven percent, as the travel restrictions will further dampen energy demand.
“We are now staring at the whole world going into a lockdown,” Vandana Hari, of Vanda Insights, said. “Oil demand can be expected to crash through the floor and all previous projections on oil consumption are now out the door.”
The oil market was already under pressure after Saudi Arabia and Gulf partner UAE stepped up a price war on Wednesday by unveiling plans to flood global markets.
The Saudi move was the latest escalation of a fight among oil producers after Russia balked at an OPEC-backed plan to cut production in response to lost demand because of the coronavirus.