The Thursday Market Minute
- Global stocks plunge as Trump issues sweeping travel ban between Europe and the United States to combat the coronavirus pandemic.
- Trump says ban will not include goods, or travel to the UK, and will last for at least 30 days starting Friday at midnight.
- European stocks tumble to the lowest levels since June 2016 as airline, energy and banking sector stocks dive after the ECB keeps its key interest rates unchanged.
- VIX volatility index surges to December 2008 high as investors reel from market swings and brace for "limit down" suspensions in pre-market trading.
- Global oil prices extend declines as airline stocks plunge and investors factor in the ongoing price war between Saudi Arabia and Russia.
- U.S. equity futures point to more losses on Wall Street Thursday, with the S&P 500 hitting 'limit down' levels that would drag the benchmark into bear market territory.
Wall futures plunged lower again Thursday, pulling the S&P 500 into bear market territory after the Dow did the same last night, after President Donald Trump ordered a sweeping travel ban between the U.S. and Europe amid the global coronavirus pandemic.
After vowing earlier this week to deliver a major economic support package to cushion the blow of the rapidly-expanding virus, which has now infected more than 1,300 Americans, Trump pivoted to issuing the 30-day travel ban from the Oval Office last night, sending global markets into a tailspin.
"We are marshaling the full power of the federal government and the private sector to protect the American people," Trump said in the nationally televised address. "This is the most aggressive and comprehensive effort to confront a foreign virus in modern history."
The ban, which will exclude travel between the U.S. and the United Kingdom, added further headline pressure to market already reeling from last night's 1,400-plus point decline for the Dow Jones Industrial Average, a move that dragged the benchmark into so-called bear market territory -- or 20% lower from its February 12 peak -- and ended a bull market that began on March 9, 2009.
Europe stocks plunged on the news, which does not include restrictions on any trade in goods, with airline, energy and financial sector stocks leading the declines after the European Central Bank made no changes to its three key interest rates but pledged instead to re-open its quantitative easing program with E120 billion in new asset purchases.
The Stoxx 600 benchmark was seen 5.55% lower in early trading, taking the broadest measure of regional share prices to the lowest levels in nearly four years. while Britain's FTSE 100 tumbled 5.75% to pull it back below levels last seen during the Brexit sell-off in the summer of 2016. Germany's DAX performance index fell 6.8%.
Wall Street futures, too, were marked sharply lower in early pre-market trading, and were subject to another "limit down" suspension after falling 5% prior to the market open.
Futures contracts tied to the Dow Jones Industrial Average were last seen indicating a 1,191.22 point opening bell loss while those linked to the S&P 500, which narrowly avoid being dragged into bear market territory last night, are suggesting a 138.28 point decline for the broadest measure of U.S. stocks.
Active trading in the main SPDR S&P 500 ETF SPY, however, continues, with the market's biggest passive investment vehicle slumping 7% to change hands at $255.40 each. The SPDR Dow Jones Industrial Average ETF DIA, meanwhile, was last seen 7.4% lower at $218.40 each.
The 30-day travel ban, which goes into effect at midnight on Friday, also hammered global oil markets as traders re-set airline demand forecasts amid the ongoing price war between Saudi Arabia and Russia following the collapse of OPEC's production cut agreement last week.
Brent crude futures contracts for May delivery, the global benchmark, were last seen $2.64 lower from their Wednesday close in New York and trading at $33.15 per barrel, while WTI contracts for April delivery were marked $2.11 lower at $30.87 per barrel.
The expectations pressured both the euro, which slipped to 1.1238 against a weakened U.S. dollar, and pushed benchmark 10-year bund yields to a record low of -0.77%.
Stateside, 10-year U.S. Treasury yields slipped to 0.695%, with bond traders taking down some $24 billion in new paper in a poor-received auction last night, while the U.S. dollar index steadied at 96.534 against a basekt of six global currencies.
The CBOE's key volatility gauge, known as the VIX, was marked 31.8% higher at 62.33, meaning options traders are pricing in a 62% chance that the S&P 500 will rise or fall by 62% over the next year.
Overnight in Asia, Japan's Nikkei 225 tumbled 4.41% to peg the benchmark at 18,559.63 points, the lowest since April 2017, while the region-wide MSCI ex-Japan index was last seen 4.5% lower heading into the final hours of trading.