Fears of a global economic downturn due to the coronavirus epidemic caused the stock markets to shake again on Friday.
“Investors’ nerves are on edge,” said analyst Jochen Stanzl of online broker CMC. While the stock markets continued to rush downwards, investors took refuge in the “safe haven” of federal bonds. This pushed the yield on ten-year securities down by seven basis points to a record low of minus 0.746 percent. This was below the previous low of minus 0.743 percent of last September, when brexite and the tariff dispute between the USA and China had unsettled investors. The yield on ten-year US bonds also fell to a record low for the tenth time in eleven days.
The panic is keeping the government bond markets on both sides of the Atlantic increasingly in suspense, said bond expert Elmar Völker of LBBW. “In this situation, investors are ‘hoarding’ everything that promises security in the event of a further worsening crisis.
On the stock markets, the Dax slipped by 3.4 percent to 11,541.87 points on Friday. The EuroStoxx50 lost a similar amount. On Wall Street, the indices also fell to their knees, although the US economy created significantly more jobs than expected in February.
Although the financial aid measures announced made it clear how seriously central banks and governments assessed the economic consequences of the epidemic, Stanzl said. “However, it is questionable whether they will be sufficient to prevent a recession in important parts of the world.
“DOWNWARD SPIRAL THREATENS”
The risk of a short, drastic recession is increasing considerably, warned Nigel Green, head of investment advisor deVere. There is a threat of a downward spiral of lower consumer spending and investments, which would trigger job cuts, which in turn would lead to lower consumer spending and investments. The fear of recession was also reflected in the crude oil market, where the price of North Sea Brent crude fell by 9.4 percent to 45.28 dollars per barrel (159 litres), its lowest level since June 2017. According to insiders, Russia has blocked the planned production cuts by oil-producing countries. The Opec states wanted additional production cuts of 1.5 million barrels per day to stabilize the price of the raw material.
On the stock market, securities of aviation and tourism stocks again flew out of the depots due to travel restrictions and cancelled holidays. The European sector index fell to a five-and-a-half-year low, but then limited its losses to minus 2.2 percent. In London, Carnival shares lost 7.8 percent after one of its cruise ships was refused entry into the port of San Francisco on suspicion of corona. Liquidity worries caused the shares of the no-frills airline Norwegian to drop 22.8 percent.
The threat of a drop in income due to falling bond yields dealt another blow to bank stocks. The European sector index fell by 3.2 percent.
The dollar was under pressure due to speculation on further US interest rate cuts. The Dollar Index, which reflects the exchange rate against major currencies, fell to a 13-month low of 95.7110 points.