US Fed injects $1.5tn to markets as Dow and FTSE suffer worst day since 1987 - MW

Panic of the coronavirus virus in global financial markets amid the biggest market in a generation forced the US central bank to inject trillions of dollars into the bond market in a vigorous effort to prevent the repetition of the 2008 credit crisis.

As stock prices plunged around the world on Thursday, with both London and New York markets suffering from the worst day since the Black Monday crash in October 1987, the Federal Reserve for New York said. know they will inject US $ 1.5 million into the US financial system to prevent the market from freezing.

It came after the European Central Bank failed to reassure panic investors with a vandalized bailout package, due to coronavirus deaths and many countries imposing emergency travel bans and ban large public gatherings.

The FTSE 100 index of the leading UK company stock lost 9.87% on Thursday in the second largest record on record, losing the total amount of money in the London market since mid-February - before the severity of the coronavirus epidemic becomes clear - up to over 540 billion pounds. The index closed down more than 600 points at 5,237, the lowest level since 2012. The Dow Jones index in New York closed down 10%, losing 2,352 points to 21,200.

The Euro STOXX 600 index, which tracks all stock markets across Europe including FTSE, has fallen by 11.48% - the worst day since its launch in 1998. Panic sell is reminded reminded by coronavirus that wiped out £ 2.7 million worth of STOXX 600 stock since its all-time high on February 19.

Neil Wilson, chief market analyst of online market trading platform, said. Markets in the market are at a breakout point, there is now a real systemic risk with the financial market completely chaotic about coronavirus.

In the most significant intervention to date, the New York Fed said it would provide three $ 500 billion blocks into a branch of the financial market allowing banks to exchange government bonds for cash. It comes amid signs that the international financial system is under severe stress from some of the most extreme movements in stocks and bonds in a generation.

Governments and companies use the bond market to borrow money from investors. During the 2008 credit crisis, banks stopped lending to each other as panic spread throughout the system. The Fed warned it had identified a very unusual disruption, amid fears of economic losses from Covid-19.

However, the move provided only a brief respite for Wall Street stock prices, before the index plummeted back to its worst day since 1987.

European markets suffered the most, with shares in France and Germany plunging 12%, in Spain down 14% and Italy - the center of the boom in Europe - down nearly 17% on the bad day. worst in history.

Triggers for market instability came after Donald Trump announced a unilateral travel ban from 26 EU countries, sparking stock market panic after a week of strong selling pressure, when tensions There is an increase among countries on the best way to deal with viruses.

The pound was also affected, dropping about 2 cents against the US dollar to $ 1,259 - the lowest level since October - when investors sought safety for the US currency, which was usually considered as a safe haven during the height of financial crisis. The hurry to buy dollars also pushed the euro down 1.5%, back below the level of $ 1.11.

Widespread losses have occurred despite the ECB becoming the latest global central bank to release emergency stimulus measures, following the efforts of the Fed and the Bank of England, which announced emergency interest rate cuts issued on Wednesday along with the Rishi Sunak expansion budget.

Stimulating measures to try to boost the fragile eurozone economy include easing lending restrictions by monetary banks and buying more private-sector bonds.

However, ECB president Christine Lagarde did not disclose the rate cuts that investors expected and instead called on eurozone governments to step in with increased spending.

The casual Lagarde was certainly taken down after she refused to remind her predecessor Mario Draghi and said the bank would do everything it could to protect the eurozone from a recession.

Referring to the ECB calling for a reduction in borrowing costs for highly-indebted eurozone countries, Lagarde said: `` We are not here to close the [gap] now, there are other tools and other actors to solve these problems.

The cost of borrowing to the Italian government skyrocketed, raising concerns about a repeat of the 2012 eurozone debt crisis when the ECB's boss, Draghi, announced he would do whatever it takes to preserve the euro. .

Claus Vistesen, chief economist of the euro area at the macro-economic consulting firm Pantheon, said the ECB chief's intervention was an Islamic disaster with a challenging scale for the global economy. .

[[]] 'S performance will go down as a pathetic failure of part of the ECB. It is one of the largest central banks in the world, and markets today are calling for a shutdown; they have anything, but he says.

Bankers from lenders including Barclays, HSBC, Lloyds and Natwest were convened by Rishi Sunak and Mark Carney, the Bank of England governor, to discuss coordinated action to support small businesses.

The group of lenders, including Santander, Virgin Money and Danske Bank, confirmed they are providing more than £ 20 billion to companies that need emergency funding in the coming months.

MW