The world’s financial markets collapsed
On March 12, stock markets experienced a record drop in quotations. The leading American indexes lost 9.5–10 %, European ones fell by 12-17 %, and Russian ones fell by 8.3-11 %. For the first time in four years, the dollar exchange rate reached 75.5 rubles, and the Euro exchange rate exceeded 84 rubles. Investors are responding to the threat of isolation due to the spread of the coronavirus.
On Thursday, March 12, trading on us exchanges led to a rapid drop in quotations and the renewal of multi-year lows. The market panic was triggered by the decision of US President Donald trump to ban travel from Europe to the US due to the spread of the coronavirus.
The Dow Jones index fell 10 % to 21,200. 62 points. This was the largest drop since black Monday in 1987, when it fell by more than 22 %.
And the Standard & Poor’s 500 index fell by 9.5 %, reaching 2,480. 64 points. A similar drop occurred during the acute phase of the mortgage crisis in October 2008.
At the end of trading, the Moscow exchange index fell by 8.3 %, and the RTS dollar index fell by 11 %. The dollar and Euro exchange rates reached a four-year high of 75.5 and 84 rubles, respectively, on the back of a 9% drop in Brent oil prices below $ 33 per barrel.
This is the worst day ever for European stock indexes. The STOXX Europe 600 composite index of the region’s largest businesses fell 11 %. The fall in European indices accelerated against the backdrop of the collapse of the us stock market at the opening of trading, writes Bloomberg. Investors were also disappointed by the measures taken by the European Central Bank to support the economy.
The British FTSE 100 index fell by 10.9 %, the German DAX — by 12.2 %, the French CAC 40-by 12.3 %. Spain’s IBEX 35 and Italy’s FTSE MIB are losing 14% and 16.9% respectively.
Against this background, the US Federal reserve will provide 1.5 trillion dollars to the short-term lending market, where banks take short loans secured by Treasury bonds, reports the Washington Post. The Central Bank also announced that it will buy $ 60 billion worth of Treasury bonds from March 13 to April 13.
“We are seeing a flock of black swans,” said Guillermo Hernandez Sampere, head of trading at asset management company MPPM EK. “You can’t stop the pandemic by printing money. We’re all in the same boat. These are terrible times, ” he added. According to the expert, unlike in 2008, the problems of the market cannot be solved with the help of monetary policy.
“There is complete capitulation in the markets,” comments Alberto Tocchio, investment Director at Colombo Wealth SA in Lugano, Switzerland.
“There is no book on financial history that can tell you how to behave in this situation,” Sampere said.