‘Race to the bottom’: Stocks drop, dollar soars as coronavirus fears overpower stimulus efforts

Traders and financial professionals work ahead of the closing bell on the floor on the New York Stock Exchange (NYSE), October 26, 2018 in New York City.Drew Angerer/Getty Images

  • Stocks plunged and the US dollar soared Thursday as coronavirus fears overpowered stimulus efforts.
  • The European Central Bank unveiled a bond-buying program worth 750 billion euros, or $814 billion, on Wednesday.
  • President Donald Trump signed a coronavirus relief bill into law, expanding unemployment insurance and granting sick leave to hourly employees.
  • Volatile markets and fears of a global credit crunch drove investors to US dollars, pushing the British pound to a 35-year low.
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Stocks tumbled and the US dollar soared Thursday as investors doubted central banks and governments would succeed in stopping the novel coronavirus from choking the global economy.

Late Wednesday, the European Central Bank announced it would spend 750 billion euros, or $814 billion, buying private and public bonds.

“Extraordinary times require extraordinary action,” the ECB’s president, Christine Lagarde, said, emphasizing that there were “no limits” to her commitment to the euro.

The massive stimulus comes after the US Federal Reserve cut interest rates to near zero on Sunday and committed to spending hundreds of billions of dollars on asset purchases. President Donald Trump also signed a coronavirus relief bill into law Wednesday that expands unemployment insurance and grants sick leave to hourly employees. Congress now turns its focus to a $1 trillion stimulus package that includes support for the airline industry and direct payments to Americans.

The novel coronavirus — which causes a flu-like disease called COVID-19 — has infected more than 218,000 people, killed at least 8,800, and spread to upward of 150 countries. It has disrupted global supply chains, forced governments to temporarily close businesses such as bars and restaurants, and hammered demand as consumers stay home to reduce transmission.

Jittery investors, wary of volatile markets and a global credit crunch, took shelter in US dollars on Thursday. The demand surge pushed the ICE US Dollar Index, which weighs the greenback against a basket of six other major currencies, to its highest level since January 2017.

Moreover, the British pound slumped below 1.16 to the dollar — a 35-year low — as Prime Minister Boris Johnson announced schools would close until further notice starting Friday, and news outlets reported a London lockdown was expected.

“The US dollar is shoving a sharp spike through all other currencies,” Michael Every, the senior Asia-Pacific strategist at RaboResearch, said in a research note. The global economy runs on dollar debt, he added, meaning no one can “stand in the way of that armour-plated steamroller.”

Markets showed signs of relief early Thursday, but analysts warned the sell-0ff could continue.

“Despite heavy losses, we do not rule out the possibility of a deeper bear market,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, said in a morning note.

“Equities’ race to the bottom continues at full speed,” she added.

Here’s the market roundup as of 9:45 a.m. ET:

  • US stocks dropped sharply, with the Dow Jones Industrial Average down 2.9%, the S&P 500 were down 2.9%, and the Nasdaq down 1.5%.
  • European equities fell, with Germany’s DAX down 2%, Britain’s FTSE 100 down 2.8%, and the Euro Stoxx 50 down 0.5%.
  • Asian indexes dropped, with China’s Shanghai Composite down 1%, Hong Kong’s Hang Seng down 2.5%, South Korea’s KOSPI down 8.4%, and Japan’s Nikkei down 1%.
  • Oil prices rebounded, with West Texas Intermediate up 7.4% at $22.40 a barrel and Brent crude up 2.4% at $25.50.
  • The benchmark 10-year Treasury yield fell to 1.12%.
  • Gold fell 0.3% to $1,473.
  • Bitcoin climbed 7% to about $5,800.

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