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European markets plunge despite central bank plans

By Lawrence Gash

US futures point to 1,000 point Monday fall

European markets have opened down at the start of the week, despite the coordinated efforts of central banks across the world to limit the economic impact of Covid-19.

By mid-morning trading, both the pan-European Euro Stoxx 600 and Euro Stoxx 50 indices have plunged by more than 7.3 per cent.

Italy continues to be the worst affected nation outside of China, with more than 1,800 confirmed deaths from the novel coronavirus. The third-largest economy in the eurozone has also contracted as a result, with the FTSE MIB index down 8.33 per cent in Monday morning trading and 41 per cent in the past month alone.

Spain followed Italy’s lead over the weekend by declaring a complete lockdown after its total Covid-19 death count doubled in a day. Out of all European indices the IBEX 35 is the worst-affected at the start of the week, down more than 9 per cent.

France’s Cac 40, Germany’s Dax and Britain’s FTSE 100 have fallen by more than 8, 7 and 6 per cent respectively.

Travel and leisure stocks have spearheaded the continent’s Monday dive, falling more than 14 per cent as people stay home and governments warn against non essential travel. Although the World Health Organisation (WHO) has declared that the epicentre of the pandemic is now in Europe, Asian markets have also continued to plunge, with Japan’s Nikkei 225 and Hong Kong’s Hang Seng indices closing down 2.46 and 4.03 per cent respectively. The already-fragile Indian economy has suffered most in recent days, with Bombay’s BSE Sensex down more than than 8 per cent.

Such marked falls across Eurasia indicate that Sunday’s coordinated action by the US Federal Reserve, Bank of England, Bank of Canada, Bank of Japan, Swiss National Bank and European Central Bank have failed to instill confidence in the global financial market.

Hoping to bolster liquidity as firms across the globe rush for dollars (USD), these central banks announced that they will use their swap lines to maintain the flow of the world’s reserve currency.

With such coordination, a further $700bn (£568bn, €626bn) injection on top of last week’s $1.5tn and another emergency rate cut bringing interest rates to between 0 and -0.25 per cent, one would think the US markets would at least be temporarily buoyed.

However, with S&P 500, Dow Jones and Nasdaq futures all losing more than 4.5 per cent, it would appear that American markets will follow Europe and Asia’s lead when they open on Monday.

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