Stock markets and the Canadian dollar plunge again as coronavirus sell-off continues

Stock markets sank Wednesday in a third day of wild price swings after President Donald Trump and other world leaders promised aid to get their economies through the coronavirus outbreak.

European markets were down about 5 per cent after broad losses across Asia, while trading on Wall Street and in Toronto got close to the level of selling where automatic circuit breakers kick in to shut down trading.

The Dow Jones and TSX were both down by about 5 per cent in early trading. If they decline by 7 per cent, circuit breaker rules mandate a 15-minute shutdown, something which has happened three times in recent weeks.

The White House proposal could approach $1 trillion in spending to ward off the pressure of business closures to contain the virus. The Federal Reserve has announced more measures to keep financial markets operating. Treasury Secretary Steven Mnuchin said Trump wants to send checks to Americans in the next two weeks to help support them while more parts of the economy come closer to shutting down.

The moves add to efforts from governments around the world that include trillions of dollars worth of loans for businesses, tax deferrals, mortgage relief and grants. Trump’s proposal would include $250 billion US for small businesses and $50 billion US for airlines.

That is a good start but investors need to see the number of infections slow before markets can find a bottom, analysts said. The number of new cases reported in China, where the virus emerged in December, is declining but infections in the United States, Europe and elsewhere are increasing.

There are “green shoots of risk appetite emerging, and some further concerning aspects,” said Chris Weston of Pepperstone Group in a report. “I am not going to call a bottom in the risk story by any means.”

Virus is making the economy sick

For most people, the coronavirus causes only mild or moderate symptoms, such as fever and cough, and those with mild illness recover in about two weeks. Severe illness including pneumonia can occur, especially in the elderly and people with existing health problems, and recovery could take six weeks in such cases.

On Monday, the Dow lost nearly 3,000 points after Trump said a recession may be on the way. The S&P is off 25.3 per cent from last month’s record.

The virus has spread so quickly that its effects haven’t shown up in much U.S. economic data yet.

On Tuesday, a report showed retail sales weakened in February, when economists expected a gain. A separate report a day earlier showed manufacturing in the state of New York contracting.

“The global recession is here and now,” S&P Global economists wrote in a report Tuesday.

In energy markets, the price of oil lost another $2 to dip to $25 a barrel, it’s lowest level in 17 years. That sent the Canadian dollar tumbling to under 70 cents US for the first time in years.


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