Fed debt purchase pledge fails to stem new wave of Covid-19 global stocks sell-off
A pledge by the US central bank, the Federal Reserve, for a massive spending spree of all types of US debt failed to put the brake on the global stock market sell-off, suggesting that investors are looking for huge government spending programmes and not just market-calming initiatives by central banks.
The Fed’’s pledge all but mirrored the remarks of former ECB president Mario Draghi during the last crisis, when he said the central bank was ready to do whatever it took to save the euro, in 2012.
The Fed said it was prepared to purchase unlimited amounts of bonds to keep borrowing costs low for corporations and US states and local governments alike.
However, European and US stock markets fell again.
In Europe, the Ftse-100 and Stoxx indices fell by up to 4% and the Iseq in Ireland fell by almost 4%.The biggest casualties included Irish Ferries-oner ICG -- which slid 17% -- as full-scale travel bans may be closer.
Bank of Ireland and Paddy Power-owner Flutter, also fell, both ending 7% lower.
The IMF said that the coronavirus pandemic will cause a global recession in 2020 that could be worse than that seen during the global financial crisis of 2008-2009, but the world’s economic output should recover in 2021.
IMF managing director Kristalina Georgieva welcomed extraordinary fiscal actions already taken by many countries.
“Even more will be needed, especially on the fiscal front,” she said. The price of Brent crude fell 47 cents to $26.51 a barrel.
Joshua Mahony at online broker IG said that the "move towards a more isolated and restricted world comes to the detriment of global GDP".
"From a market perspective, the prospect of a world with empty skies and roads serves to dampen sentiment towards crude prices again," he said.
