Coronavirus crash wipes $5 trillion off global stocks

Coronavirus panic sent world share markets skidding again on Friday, compounding their worst crash since the 2008 global financial crisis and pushing the week’s wipeout in value terms to $5 trillion (Rs.363 lakh crore).

The rout showed no signs of slowing as Europe’s main markets slumped 3-5% and the ongoing dive for safety sent yields on US 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 spiralled.

Bets are now that the Federal Reserve will cut US 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 blackened the outlook for a world economy that was already struggling with US-China trade war fallout.

MSCI’s all country world index, which tracks almost 50 countries, was down more than 1% ahead of US trading and almost 10% for the week, the worst since October 2008. Wall Street shares plunged 4.4% on Thursday alone, their largest fall since August 2011. Europe’s airlines and travel stocks have plunged 18% in their worst week since the 2001 9/11 attacks in the US. The CBOE volatility index, often called the “fear index”, jumped as high as 47, its highest in about two years, well out of the 11-20 range of recent months.

Oil prices languished at their lowest in more than a year having plunged 12% this week - the worst since 2016 - while all the major industrial metals have dropped between 3% and 6%.

World Health Organization Director General Tedros Adhanom Ghebreyesus said the virus could become a pandemic as the outbreak spreads to major developed economies such as Germany and France.

Indian shares sank on Friday for a sixth straight session, capping their worst week in more than a decade, over fears of global recession. Asia’s third-largest economy grew 4.7% in the December quarter from a year ago, slowing from the previous quarter, but analysts have forecast a bumpy March quarter on growing fears of a global pandemic.

The broader NSE Nifty 50 index ended 3.71% lower at 11,219.20 and the benchmark S&P BSE Sensex fell 3.4% to close at 38,383.32. For the week, the Nifty 50 index shed 7.3%, while the Sensex dropped 6.8%, their worst decline since the 2008-09 financial crisis.

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