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Wall Street resumes slide as economic toll from pandemic rises
WALL Street stocks resumed their downward slide early on Wednesday as the economic toll mounts from the rapid near-shutdown of key industrial and services sectors.
About 15 minutes into trading, the Dow Jones Industrial Average stood at 20,040.66, down around 1,200 points or 5.6 per cent. The broad-based S&P 500 slumped 5.4 per cent to 2,392.27, while the tech-rich Nasdaq Composite Index tumbled 4.6 per cent to 6,997.10.
The dreary open puts at risk nearly all of the gains from Tuesday, a rare up day in a month that has seen US stocks suffer some of their worst sessions in history and ended the 11-year bull market.
Officials in Washington are discussing massive stimulus packages of US$1 trillion or more, including immediate cash funds sent to American taxpayers. But there are still grave doubts about the significant hit to US employment in the coming months following significant shutdowns in the retail, hospitality and airline industry.
"The missing fundamental ingredient for a sustainable recovery in risk appetite is some evidence that the growth of global Covid-19 infection rates is peaking," said Paul O'Connor, head of multi-asset at Janus Henderson Investors. "Clearly, we are not there yet."
The planned US stimulus is aimed at avoiding the worst impact of a crisis that already looks set to plunge many of the world's economies into recession. In the meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilise financial markets. Those responses came after stresses appeared in the short-term funding markets.
"I don't think we're out of the woods yet in terms of liquidity," Mark Konyn, chief investment officer at AIA Group in Hong Kong, told Bloomberg TV. "It's a question of when the fiscal measures will have the most efficacy."
In Germany, Chancellor Angela Merkel said the government will not rule out joint European Union debt issuance to help contain the impact.
Elsewhere, Bloomberg's industrial-metals index dropped for a third day, with copper, nickel and aluminium among the biggest losers. Gold resumed losses as traders sold the metal to cover margin calls in other markets.
European shares also tumbled on Wednesday as fears over the relentless global spread of the coronavirus overshadowed sweeping stimulus measures to support businesses and contain the economic damage from the pandemic.
The pan-European STOXX 600 index sank 4.6 per cent, sending it back towards near-seven-year lows hit in a massive global sell-off on Monday, with bourses in London and Germany leading declines.
Industrials posted among the heaviest losses following calls for a US$60 billion bailout of the US aerospace industry, with JP Morgan analysts saying it will take years for the sector to recover.
Airbus tumbled 19.8 per cent to its lowest since 2016, bringing its total declines in the quarter to nearly 60 per cent. MTU Aero Engines and Rolls Royce plunged between 20.7 per cent and 14.7 per cent.
"Right now, the predominant concern is that all the shutdowns of just about everything is going to lead to a recession," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. "Those fears (are) far outweighing everything else."
European shares have lost more than 30 per cent since hitting a record high mid-February as some countries in the bloc imposed national lockdowns to halt the spread of Covid-19. AFP, BLOOMBERG, REUTERS