European, US stocks resume slide as virus spreads

LONDON: Major European and US stock markets sank on Thursday as investors focused on the rapid spread of novel coronavirus outside China and more turbulence for airlines.

Asian equities had jumped following a surge on Wall Street on Wednesday, with confidence buoyed by global stimulus measures to mitigate the economic impact of COVID-19.

The dollar was lower against its main rivals after the Federal Reserve this week unexpectedly slashed US interest rates by half a percentage point, while the Japanese yen continued to benefit from its status as a haven in times of economic turmoil.

The number of coronavirus cases in the world rose to 95,781, including 3,284 deaths, across 84 countries and territories by 1000 GMT Thursday, according to a report compiled by AFP from official sources.

Since 1700 GMT Wednesday, 971 new contaminations and 39 new deaths were identified.

Recession threat

“On a week that has seen extraordinary action taken to stem the flow of pessimism, we are yet again heading towards the weekend surrounded by a sea of red,” said market analyst Joshua Mahony at online trading firm IG.

After last week’s rout — the worst since the 2008-09 financial crisis — equities had enjoyed a modest revival over the past few days as governments and central banks kick into gear in the face of recession warnings.

“Despite brief moments of stimulus-fuelled optimism, traders always return to the gradually increasing threat of the coronavirus,” said Mahony.

“What was largely a Chinese issue just a month ago, has turned into a global crisis that threatens to throw the world economy into recession.”

He pointed to news that OPEC is pushing for a cut in oil production of 1.5 million barrels per day failing to lift prices considerably as a indication that investors are looking at the magnitude economic impact of the health crisis.

Brent oil had sunk under $50 on Sunday, a level not breached since July 2017, as traders fretted over the virus sapping global demand.

The oil production cut “is likely to be a drop in the ocean compared with the potential decline in demand that could come if we see global travel grind to a halt,” said Mahony.

Airlines suffer

Airlines swooped lower on gloomy industry forecasts on the back of coronavirus — and after the collapse of British regional airline Flybe.

The world’s airline sector could lose up to $113 billion in revenue this year due to the impact of coronavirus, the International Air Transport Association (IATA) warned.

In London, British Airways owner International Airlines Group saw its shares slide 5.4 percent, Lufthansa shares shed 3.7 percent in Frankfurt and shares in Air France-KLM slumped 11.2 percent in Paris.

Shares in major US airlines also dropped sharply, with those in American falling 8.4 percent in late morning trading, followed by a 5.0 percent drop for Delta and 3.2 percent for low-cost Southwest.