Stock market losses reach £793bn as US Federal Reserve pledges unlimited emergency cash
More than £60billion was wiped off the stock market yesterday – taking total losses since the coronavirus pandemic hit to £793billion.
On another dismal day for investors, the FTSE 100 closed below 5,000 points for the first time since 2011, down 3.8 per cent, or 196.89 points, to 4993.89 points.
Savers were also knocked by another barrage of dividend cuts as ITV, shared office firm IWG and B&Q-owner Kingfisher joined the slew of companies to axe shareholder payouts.
US markets were unable to haul themselves into the black, despite the Federal Reserve setting off another ‘bazooka’ in the form of unlimited quantitative easing
There was no respite for sterling, which fell as low as $1.1449 and €1.0654. It has not traded at these levels against the dollar since 1985.
And oil, which has plummeted amid fears that economic activity around the world could grind to a halt, crashed below $25 a barrel at one point having been close to $70 early this year.
The gloom was echoed in stock markets around the world, as Germany’s Dax slid 2.1 per cent, France’s CAC fell 3.3 per cent and Italy’s FTSE MIB slipped 1.1 per cent.
Even US markets were unable to haul themselves into the black, despite the Federal Reserve setting off another ‘bazooka’ in the form of unlimited quantitative easing (QE).
This means the Fed will set no limit on how much it can inject into the economy through buying assets such as government and corporate bonds.
Kevin Doran, chief investment officer at broker AJ Bell, said: ‘After the ECB and Bank of England rolled out their quantitative easing cannons last week, the Federal Reserve have opted to go nuclear with the promise to unleash uncapped QE.
‘Impressive in another era, but essentially still trench warfare in a world where the enemy has gone airborne.
‘Providing liquidity to markets is helpful, but shoring up asset prices isn’t what’s called for this time around. What people are looking for is certainty over either their income or expenses.’
The FTSE 100 closed below 5,000 points for the first time since 2011, sterling fell as low as $1.1449 and €1.0654 and oil crashed below $25 a barrel at one point
Chancellor Rishi Sunak went some way to providing this certainty last week with his promise to pay 80 per cent of the wages of employees who were forced out of work, up to £2,500 a month, but US workers are still waiting for politicians to agree on how to help them.
The US Senate failed to agree a fiscal stimulus bill on Sunday, and details were still being thrashed out between the Republicans and Democrats last night.
Although Senate minority leader Chuck Schumer said the lawmakers were close to agreeing the massive fiscal boost, markets seemed less convinced.
The Dow Jones was down 2.6 per cent, while the broader S&P 500 index was also down 2.6 per cent.
David Madden, an analyst at CMC Markets, said: ‘The deadlock in Washington DC is not a good look for the US right now, as it projects an image of division at a time when solidarity is desperately needed.
There is talk of a $2trillion rescue package, but to be honest, traders seem to be so worried it might not be enough to coax the buyers in from the cold.’
While investors will be hoping the market pessimism soon bottoms out, experts think the falls could continue for some time.
Sixth Street Partners, the debt arm of private equity giant TPG, sent out a grim letter to investors last week warning coronavirus would bring ‘unprecedented revenue destruction’ to even the biggest companies.
The International Monetary Fund (IMF) called for ‘solidarity’ between countries.
Speaking after a meeting of the G20’s finance ministers and central bank governors, its managing director Kristalina Georgieva said: ‘The human costs of the coronavirus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage. This is a moment for solidarity.’