Shares tank after shock US rate cut: Dow falls 786 points

Shares tank after shock US rate cut: Dow falls 786 points as Trump urges Fed to do more and Carney vows help for UK firms

Shares on Wall Street tumbled last night after the first emergency interest rate cut in the United States since the financial crisis spooked investors worried about the coronavirus.

The Dow Jones Industrial Average fell nearly 1,000 points before finally closing down 786 points, or 2.94 per cent, amid escalating fears over the impact of the deadly epidemic on the global economy.

The latest sell-off came after the Federal Reserve cut rates from between 1.5 per cent and 1.75 per cent to a range of 1 per cent to 1.25 per cent.

Fed chairman Jay Powell (pictured), who has been criticised by President Donald Trump for setting rates too high, said the virus ‘poses evolving risks to economic activity’

Fed chairman Jay Powell, who has been criticised by President Donald Trump for setting rates too high, said the virus ‘poses evolving risks to economic activity’. 

The Dow rose more than 300 points in the immediate aftermath of the rate cut as investors welcomed the bold move.

But shares then slammed into reverse amid fears that there was little authorities can do to shield economies.

George Lagarias, chief economist at Mazars, said: ‘This is one of the very few times in recent financial history that the Fed fires its bazooka, and nothing happens. Markets did not follow the move with an exuberant rally.

‘Rate cuts don’t stop viruses or mitigate demand and supply damage from people not being able to leave their homes.’

With stock markets tanking, Trump demanded more rate cuts. He said on Twitter: ‘The Federal Reserve is cutting but must further ease and, most importantly, come into line with other countries/competitors. 

We are not playing on a level field. Not fair to USA. It is finally time for the Federal Reserve to LEAD. More easing and cutting!’ 

The Australian central bank also cut rates, to a record low of 0.5 per cent, and pledged to take further action if necessary. 

Other central banks are ready to act, including the Bank of England, European Central Bank and Bank of Japan.

It is feared the outbreak, which started in China but has spread round the world, disrupting air travel and hampering business, could tip countries into recession. Chancellor Rishi Sunak is expected to use next week’s Budget to support the economy.

And Bank of England Governor Mark Carney yesterday said the authorities stood ready to protect small firms. 

‘We don’t want viable businesses to go out of business because of the very necessary steps that need to be taken to protect and serve the British public over the course of the near future,’ he said.

The International Monetary Fund and World Bank last night said they will adopt a ‘virtual format’ for next month’s spring meetings instead of convening some 10,000 government officials, business leaders and other delegates in Washington.

The World Bank also revealed that it would make an emergency funding package worth £9.2billion available to developing countries which are struggling to cope with the Covid-19 outbreak.

Finance ministers and central bankers from the G7 nations of the US, Canada, UK, Japan, Germany, France and Italy also held a conference call yesterday to discuss the epidemic. 

Following the call, they said: ‘Given the potential impacts of Covid-19, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks.

‘Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy.

‘G7 central banks will continue to fulfil their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.’

Coronavirus chaos 

OLYMPIC CONCERN Temporary power group Aggreko is monitoring the potential impact of coronavirus and the Tokyo 2020 Olympics. The group is among firms providing power for the upcoming games in Tokyo, but there are fears Japan may postpone the event due to the outbreak. It unveiled a 13 per cent rise in underlying pre-tax profits to £199million for 2019.

TRADING BOOST Online trading platform CMC Markets raised its profits forecasts amid increased trading volumes due to Covid-19. Profits for the year to the end of March should beat current market estimates of £199million to £202.3million.

RECRUITER WOE Recruitment giant Robert Walters has seen shares come under pressure after it warned the outbreak is likely to affect 2020 profits. 

Shares fell 5.7 per cent as the group reported 2019 pre-tax profits of £47.4million – down 6 per cent.

VISA WARNING Revenues will be lower than previously expected at credit company Visa in the first three months of 2020 due to the coronavirus.

Visa said. ‘We anticipate that this deteriorating trend has not bottomed out yet.’

SUPPLY FEARS The boss of consumer goods firm Intertek Andre Lacroix said: ‘Our 2020 performance will be affected by the temporary disruption to the supply chains of our clients in China and any impact it might have on global trade activities.’

However, he added that it was too early to say exactly what impact the virus will have on the FTSE 100 company, which works in 100 countries. Shares rose 1.7 per cent, or 88p, to 5412p.

INSURANCE BILL Insurer Direct Line said the UK’s recent winter storms are set to cost it at least around £35million, while it revealed a £1million bill so far for coronavirus travel claims.

The Churchill and Green Flag owner said Covid-19 has the potential to affect its travel business results this year, while the disruption in equity markets could knock investments and the speed of claims payouts.

Most coronavirus claims so far cover cases where customers were due to travel to countries where the Foreign & Commonwealth Office has advised against all but essential travel.

 

Source link