Stock markets were routed and the dollar stumbled on Monday after the Federal Reserve slashed U.S. interest rates in an emergency move and its major peers offered cheap U.S. dollars in a bid to prevent global lending markets seizing up.
The drastic maneuvers were aimed at cushioning the economic impact as the breakneck spread of the coronavirus all but shut down more countries, but they had limited success in calming panicky investors.
Europe, which has become the epicenter of the outbreak, saw its main stock markets plunge nearly 8% in brutal opening trade. Earlier, Wall Street futures for the S&P 500 index had hit their down-limit in the first 15 minutes of Asian trading as investors rushed for safety.
“The central banks threw the kitchen sink at it yesterday evening yet here we are (with deep falls in stock markets),” said Societe Generale strategist Kit Juckes.
“There is a great sense that central banks are going to get to grips with the issues of getting money flowing … But the human problem, the macro problem, there is nothing they can do about that.”
The Fed’s emergency 100 basis point rate cut on Sunday was followed on Monday by further policy easing from the Bank of Japan in the form of a pledge to ramp up purchases of exchange-traded funds and other risky assets.
New Zealand’s central bank also shocked by cutting rates 75 basis points to 0.25%, while the Reserve Bank of Australia (RBA) pumped more money into its financial system. South Korea cut rates and Russia rushed together a $4 billion anti-crisis fund.
Japanese Prime Minister Shinzo Abe said G7 leaders would hold a teleconference at 1400 GMT to discuss the crisis.
MSCI’s index of Asia-Pacific shares outside Japan tumbled 4% to lows not seen since early 2017, while the Nikkei fell 2% as the BoJ’s easing steps failed to reassure markets.