London — World markets fell on Wednesday as the coronavirus threat ensured an ugly start to the second quarter for equities and commodities.
Traders headed for the safety of government bonds, the dollar and gold as evidence continued to mount that the virus is sending the global economy into a deep recession.
Tokyo’s Nikkei slumped 4.5% after the worst plunge in factory activity in almost a decade. The pan-European Stoxx 600 sank 3.2% and Wall Street futures dived 3.1% after a dire forecast of likely US Covid-19 deaths.
“President [Donald] Trump warning about two dreadful weeks ahead and 100,000 to 240,000 deaths in the coming months is definitely putting a negative tone on the market,” said Société Générale strategist Kit Juckes. “It is pretty risk-off out there. It is definitely a day of lower bonds yields, falling equity indices and tin hats.”
Wall Street tumbled on Tuesday, capping the biggest quarterly fall since 1987 for the Dow Jones and the steepest for the S&P 500 since the financial crisis. That it all happened in a month and from record highs made it feel all the more brutal.
US economic activity is likely to be “very bad” and the unemployment rate could rise above 10% because of efforts to slow the spread of the coronavirus, Cleveland Federal Reserve Bank president Loretta Mester told CNBC.
There had been some glimmers of hope during Asian trading. China’s factory activity improved in March after plunging in February. It just scraped into positive territory, beating analysts’ expectations.
Blue-chip Chinese stocks failed to hold their gains, however, though Australian shares bounced 3.5% as a slowdown in new coronavirus cases there and rising iron ore prices lifted the market. But Europe’s early plunge meant MSCI’s main gauge of world stocks was down nearly 1% having slumped 22% since the start of the year.
The number of coronavirus infections globally headed towards 875,000, excluding recoveries. In a positive development, Deutsche Bank analysts noted the global growth in new cases was below 10% for two consecutive days, having exceeded that rate for most of the past two weeks.
Health officials were not upbeat, however. A World Health Organisation (WHO) official warned that even in the Asia-Pacific region, the epidemic is “far from over”.