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Markets react to Trump travel ban

By Lawrence Gash

Word Health Organisation declares Covid-19 to be a pandemic

Donald Trump has ordered a 30-day travel ban from all European nations, except the United Kingdom, to stem the spread of the Covid-19 virus. The US president also outlined plans to provide financial relief to those affected by the novel coronavirus.

Initially Trump stated that the ban would also include “trade and cargo”. However, this was amended following a marked market reaction. Taking to Twitter, the American leader said: “Very important for all countries and businesses to know that trade will in no way be affected by the 30-day restriction on travel from Europe. The restriction stops people, not goods.”

Nonetheless markets have reacted poorly to the public address. Dow (INDU) futures plunged more than 1,000 points, or 4.3 per cent, followed closely by 4.2 and 4.1 per cent drops in Nasdaq (COMP) and S&P 500 (SPX) futures.

Asian markets also continued downwards following the announcement with Japan’s Nikkei 225 and Hong Kong’s Hang Seng index falling 4.41 and 3.66 per cent respectively. Australia’s S&P/ASX 200, which already entered a bear market on March 11, suffered a further 7.4 per cent drop.

European markets have plunged once more at the start of Thursday trading, in part due to the US travel ban but also due to the virus’s continued spread throughout the continent. The indices in France, Germany, Spain and the Netherlands have all fallen by more than 6 per cent, while the FTSE 100 has fallen 5.70 per cent.

Both West Texas Intermediate (WTI) and Brent crude futures continued to fall, having already plunged as a result of the Saudi-Russian price war. By mid-morning trading (GMT) Brent stands down 5.14 per cent at $33.95 a barrel, while WTI has fallen 4.88 per cent to $31.37.

10-year Treasury yields also declined by more than 14 basis points, having only just recovered from record lows.

While the dollar (USD) strengthened against the pound (GBP) by around 0.47 per cent following the announcement, it has lost slightly on the euro (EUR) and somewhat significantly on the Japanese yen (JPY), by -0.77 per cent. At times of economic uncertainty, the yen has traditionally been seen as a safer haven than other currencies.

With the World Health Organisation (WHO) declaring Covid-19 a pandemic, numerous central banks undertaking interest rate cuts and governments pledging financial stimulus packages, the uncertainty shows no sign of abating in the near-future.

FURTHER READING: UK Budget: Chancellor dedicates £30bn to limit 'significant impact' of coronavirus on economy

FURTHER READING: ECB president urges pan-European action to avert 2008-style financial crisis

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