Another day, another bloodbath in global markets as stocks collapsed again on Thursday following US President Donald Trump’s announcement of an EU travel ban.
Thursday saw the end of a 11-year bull market in the US as stocks fell well beyond their recent highs (A bull market is said to have begun when stocks drop by more than 20 per cent below their recent highs). Indexes like the S&P 500 and NASDAQ were both below their February 19 highs by more than 24 per cent on Thursday.
The Dow Jones Industrial Average was down 8.98 per cent, and looked set for its worst day of trade since 1987. By reaching this point in just 20 days, the index recorded its fastest slide in its history according to Michael Batnick, director of research at Ritholtz Wealth Management.
The S&P 500 slid seven per cent at the start of trading, prompting a circuit breaker mechanism that temporarily halted trading. According to Reuters, traders tried to find safety in bonds and the Japanese yen.
Large US stocks like Boeing tanked 13 per cent after J.P. Morgan dropped its long-term buy recommendation for the company, as did other stocks in travel sectors like those of airlines like American Airlines and United Airlines plunged by over 13 per cent and those of cruise liners like Carnival Corp and Royal Caribbean Cruises Ltd dropped 17 and 24 per cent.
Boeing has lost nearly 40 per cent of value this year and recently announced cutbacks to cope with declining sales volumes in the wake of apprehension over its 737 MAX jet.
US Treasury yields were also down 13 basis points as demand for them increased. Bank of America analyst Mark Cabana said in a report released on Thursday that the market had become “overwhelmed by liquidity concerns” and that if this persists, it could result in widespread selling.
The outlook was equally dismal in Europe, where the sell-off was even steeper than that during the 2008-09 financial crisis, according to the Financial Times. The European Central Bank's decision to keep rates unchanged combined with the anticipated impact of Trump's travel ban saw sell-offs across the continent.
The STOXX 600 index was down by over 11 per cent by the end of the day, and by over 19 per cent sine the start of the month; The FTSE 100 was down by nearly 11 per cent by evening, Germany’s DAX was and France’s CAC 40 were both down by over 12 per cent, and Italy’s FTSE MIB lost nearly 17 per cent in value as the country’s coronavirus cases crossed 10,000.