Coronavirus crash wipes $5 trillion off world stocks

Coronavirus panic sent world share markets crashing again on Friday, compounding their worst week since the 2008 global financial crisis and bringing the wipeout in value terms to $5 trillion. The rout showed no signs of slowing as Europe’s main markets slumped 2-3% early on and the ongoing dive for safety sent yields on U.S. government bonds, seen as probably the securest asset in the world, to fresh record lows.

Hopes that the epidemic that started in China would be over in months, and that economic activity would quickly return to normal have been shattered this week as the number of international cases have spiraled. Bets are now that the Federal Reserve will cut U.S. interest rates as soon as next month and other major central banks will follow to try and nurse economies through the troubles and stave off a global recession.

Disruptions to international travel and supply chains, school closures and cancellations of major events have all blackened the outlook for a world economy that was already struggling with the U.S.-China trade war fallout. MSCI’s all country world index which tracks almost 50 countries, was down over 1% once Europe opened and almost 10% for the week – the worst since October 2008.

Wall Street shares had plunged 4.4% on Thursday alone which was its largest fall since August 2011. They have now lost 12% since hitting a record high just nine days ago, driving into so-called correction territory. The CBOE volatility index , often called the “fear index”, jumped to 39.16, its highest in about two years, well out of the 11-20 range of recent months.

The CSI300 index of Shanghai and Shenzhen shares dropped 2.9%, on track for its first weekly loss in three. Oil prices languished at their lowest in more than a year having plunged 12% this week – its worst since 2016 – while all the major industrial metals have dropped between 3% and 6%.

Coronavirus crash wipes $5 trillion off world stocks, Reuters, Feb 28