Donald Trump’s decision to ban all travel from Europe, excluding the UK, in order to stem the spread of Covid-19 has triggered further sell-offs in global markets.
European stocks have now slumped to their lowest levels since 2016. By early afternoon trading the leading indices in France, Germany and the Netherlands have fallen by more than 6 per cent while the Euro Stoxx 50, which represents the euro-zone’s blue chip stocks, has dropped 5.99 per cent.
Despite the Bank of England’s (BoE) 0.50 per cent rate cut and chancellor Rishi Sunak’s pledge for financial support to cope with the ongoing coronavirus crisis, the FTSE 100 has sunk to near four-year lows, falling by 5.64 per cent, while the more domestic FTSE 250 has dropped by 6.82 per cent.
Already-troubled airline stocks have suffered the most following the US president’s decision to ban European travel. Air France-KLM and easyJet have both fallen by more than 6 per cent, while British Airways owner IAG and leading German carrier Lufthansa have dropped by more than 7 per cent.
Norweigian Air Shuttle, which recently expanded its transatlantic operation, has been the worst affected airline thus far, falling 20 per cent. Delta and United are the American airlines most-tipped to suffer when US markets open.
US futures point to the second major sell-off this week, with S&P futures once again hitting their lower trading limit and DOW futures indicating a more than 1,000-point drop when markets open.
The emergency action taken by the White House and the president’s repeated castigation of Jerome Powell on Twitter have caused traders to anticipate a further significant US rate cut. Already Fed fund rate futures have priced in a cut of 1.0 per cent rather than the 0.75 per cent previously expected.
In currency markets the Japanese yen (JPY) has gained significantly on leading western currencies, most notably a 1.70 per cent gain on the pound (GBP). The Swiss franc (CHF), another traditional safe haven, has also gained in Thursday trading.
Oil prices have continued their precipitous plunge, with Brent and West Texas Intermediate both down by more than 6.2 per cent.
With the World Health Organisation (WHO) declaring the Covid-19 virus a pandemic and Western countries increasingly shutting down activities, market uncertainty looks set to continue.