BEIJING – Global stocks fell sharply Monday after central bank moves to shore up economic growth failed to dispel investor's fears over virus controls that are shutting down global business and travel.
There were no glimmers of optimism: European and Asian stock indexes were down as much as 10%, as was the price of oil. Trading in Wall Street futures was halted after they fell by the maximum 5%.
The Fed on Sunday made an emergency cut to its key interest rate, slashing it by a full percentage point to a range between zero and 0.25%. The central bank said it would stay there until it feels confident the economy can survive a near-shutdown of activity in the United States.
The Fed said it also will buy at least $500 billion of Treasury securities and $200 billion of mortgage-backed securities. This amounts to an effort to ease market disruptions that have made it harder for banks and large investors to sell Treasuries and to keep longer-term rates borrowing rates down.
“Despite whipping out the big guns," the Fed's action is "falling short of being the decisive backstop for markets,” said Vishnu Varathan of Mizuho Bank in a report. “Markets might have perceived the Fed's response as panic, feeding into its own fears.”
The Fed action came as major economies expanded travel curbs and closed more public facilities, raising the cost of efforts to contain the outbreak that has infected nearly 170,000 people worldwide. China, where the coronavirus emerged in December, accounts for about half of those, but a dozen other countries have more than 1,000 cases each.
Japan's central bank similarly expanded asset purchases to inject money into the economy and promised no-interest loans to help companies cope with the crisis.
The Bank of Japan also announced plans to provide up to 8 trillion yen ($75 billion) in no-interest, one-year loans to companies that face cash crunches.