ECB stimulus package fails to calm markets

The rout in global stocks deepened after the United States and European policy responses to the worsening spread of the coronavirus rattled investors pining for more.

The US equities plunged 7 percent, triggering a New York Stock Exchange circuit breaker that halts trading for 15 minutes for the second time this week.

Futures also fell 7 percent and were halted, following an address from President Donald Trump that failed to quell concerns over the possible economic slowdown from the pandemic.

This came after the European Central Bank kept its deposit facility rate at negative 0.5 percent and maintained its main refinancing rate, while it added 120 billion euros (HK$1.05 trillion) of net asset purchases through the end of 2020.

European shares fell to their lowest level in almost four years, with the benchmark Stoxx 600 index falling over 8 percent as of 9.40 last night. Travel and leisure stocks shed 8.6 percent in early trading, hitting their lowest in more than 6 years.

The US 10-year Treasury yield slid 0.65 percent as of 9.40pm and haven currencies rallied.

Oil extended losses by more than 5 percent. Brent crude was trading down US$2.04 (HK$15.91) at US$33.75 per barrel as of 8pm, while the West Texas Intermediate crude was trading at US$31.03 a barrel, down US$1.95.

"Market moves suggest monetary stimulus has reached its limits," said Lucas Bouwhuis, portfolio manager at Achmea Investment. "Most of the stimulus need to come from the fiscal side and we are not seeing enough of that yet."

Hong Kong and mainland equities fell less than peers, down 3 percent or less.

The Hang Seng Index futures fell another 400 points after the benchmark plunged 922 points to 24,309 points yesterday.

Meanwhile, 90 percent of the tacking callable bull contracts became invalid amid the plunge, according to Credit Suisse (Hong Kong).

More than 20 Hong Kong blue chips recorded one-year lows and 38 index constituents have shrunk over 20 percent from their peak, with the three oil giants - PetroChina, CNOOC and Sinopec - leading the rout after dropping over 40 percent from their highest prices this year. China Unicom (Hong Kong) also saw its price halved.

Power tools maker Techtronic lost the most among blue chips, falling 9.55 percent to HK$55.40, while Bank of Communications fell 1.61 percent, closing at HK$4.88.

Retailers including Prada and luggage maker Samsonite bore the brunt of the rout, falling 6 percent and 17.94 percent respectively.

The mainland Shanghai Composite Index fell 1.52 percent to 2,923 percent and the blue-chip CSI 300 Index lost 1.92 percent, ending at 3,950 points. The Onshore yuan also weakened 341 basis points to a two-week low of 6.984 per US dollar.

Rob Mumford, investment manager for emerging markets equities at GAM Investments, said despite short-term volatility, Beijing's "comprehensive" response to the epidemic will help anchor the local market in the longer run.

stella.zhai@singtaonewscorp.com