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Paris, Frankfurt stocks plunge further, European Central Bank avoids rate cuts

A street cleaning operative walks past the London Stock Exchange Group building in the City of London's financial district, in London, UK, March 9, 2020.
A street cleaning operative walks past the London Stock Exchange Group building in the City of London's financial district, in London, UK, March 9, 2020. © Toby Melville, REUTERS

The European stocks index has ended the day with its biggest loss on record after the European Central Bank unveiled a series of measures to shore up the eurozone economy but did not cut rates. This followed US President Donald Trump's announcement Wednesday of a month-long ban on travel from mainland Europe to the US.

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The Stoxx Europe 600 index, which measures major stocks across the region, fell 11.5% on Thursday, its worst day on record. It eclipsed the 8.5% drop during the 1987 stock market crash. France's CAC 40 fell by 12.3% and Italy's FTSE MIB a massive 16.9%.

Britain's FTSE 100 fell 10.9%, its worst loss since 1987. Germany's DAX plunged 12.2%, which is more than it lost after the attacks of Sept. 11, 2001.

Some analysts also noted how European Central Bank President Christine Lagarde underscored how it was mainly up to governments, not central banks, to help the economy through the disruption of the outbreak.

Europe's major stock markets had already fallen through the floor on Thursday after Donald Trump banned all travel from mainland Europe to the US for a month to fight the coronavirus – with the London, Paris and Frankfurt stock exchanges all falling by more than 5 percent – ramping up fears the global economy will careen into recession.

Shortly after the open, London's benchmark FTSE 100 index was down 5.3 percent, Frankfurt's DAX 30 plunged 5.8 percent, the Paris CAC 40 tumbled 5.1 percent and Madrid's stock exchange down by 5.5 percent. Switzerland's bourse got off a little more lightly, falling by 4.8 percent.

The news came after the World Health Organization officially labelled the outbreak a pandemic and hit out at "alarming levels of inaction" for its spread.

Earlier on Thursday morning, Asian equity markets, already deep in the red in reaction to the WHO announcement, also cratered after Trump's address.

Tokyo ended down 4.4 percent, while Sydney lost 7.4 percent in the ASX 200's worst day since the 2008 financial crisis. Hong Kong fell 3.5 percent in the afternoon while Shanghai was off 1.5 percent.

Seoul, Singapore and Jakarta each lost more than three percent, while Mumbai tanked more than six percent and Bangkok more than eight percent.

Manila crashed almost 10 percent after it emerged Philippines President Rodrigo Duterte would undergo a precautionary test for the virus, while his finance minister and head of the central bank were among several officials who were to go into quarantine.

The New Zealand stock market lost five percent, while Taiwan's retreated by 4.3 percent.

The Japanese yen, a key haven in times of crisis, jumped more than one percent against the dollar.

"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.

Wave after wave of bad news

The losses followed another brutal session on Wall Street, with wave after wave of bad news, including Hilton withdrawing its earnings forecast and Boeing saying it would suspend most hiring and overtime pay.

The Dow fell into a bear market having lost more than 20 percent since its recent high, and futures pointed Thursday to another rout in New York and Europe.

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 number of cases across the globe has risen to more than 124,000 with 4,500 deaths, according to an AFP tally.

In announcing the Europe ban – which excludes the UK and Ireland – Trump said the continent had seen a surge in new cases because governments failed to stop travel from China, where the COVID-19 epidemic began.

He said the prohibitions would also "apply to the tremendous amount of trade and cargo", and "various other things as we get approval".

However, the White House afterwards clarified that "the people transporting goods will not be admitted into the country, but the goods will be".

'Crying out for a response'

Oil prices were also hammered, with both main contracts falling around six percent at one point before edging back slightly. The oil market was already under pressure after Saudi Arabia and Gulf partner UAE stepped up a price war with plans to flood global markets.

"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 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.

"Markets are crying out for a co-ordinated response to COVID-19 headwinds and a lack of concrete US policy action is rattling markets," said Tapas Strickland, senior analyst at National Australia Bank.

Trump's address included several measures intended to ease the financial burden particularly for small business, including payroll tax relief and deferred tax payments.

But he did not unveil any large-scale tax cuts, which OANDA's Jefrey Halley said "has probably disappointed markets more than anything".

The bloodbath across global trading floors has come despite a raft of measures by governments worth at least $150 billion to offset the impact of the outbreak, while central banks will be called upon to cut already low interest rates and introduce other fiscal measures.

German Chancellor Angela Merkel has said she will do "whatever is necessary" to help the economy, while the European Central Bank is to hold a policy meeting later in the day at which it is under pressure to open up the taps.

(FRANCE 24 with AFP and AP)

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