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Investor Strategy

Stocks – Europe Slumps Despite Fed Moves; Autos, Airlines Hit Hard

imageStock Markets6 hours ago (Mar 16, 2020 04:30AM ET)

(C) Reuters.

By Peter Nurse – European stock markets traded sharply lower Monday, with moves by the U.S. Federal Reserve overnight to cushion the economic impact of the spread of the coronavirus only reinforcing the sense of impending doom.

At 03:30 ET (0830 GMT), the U.K.’s FTSE index was trading 7.4% lower, France’s CAC 40 was down 8.8%, while the DAX was down 7.7%. The pan-eurozone Euro Stoxx 50, dropped 9%.

The Federal Reserve moved aggressively on Sunday to support a global economy collapsing under the pressure of the coronavirus pandemic, cutting short-term rates to near zero and pledging hundreds of billions of dollars in asset purchases.

Yet these moves have done little to buoy investor confidence when weighed against the latest economic data showing the impact from the virus on the world’s second-largest economy.

China’s factory production plunged 13.5% in January-February from the same period a year earlier. That was the weakest reading since January 1990 when Reuters records started, and a sharp reversal of the 6.9% growth in December.

Retail sales shrank 20.5% on-year, compared with 8% growth in December, while China’s jobless rate rose to 6.2% in February, compared with 5.2% in December and the highest since the official records were published.

Although the Chinese economy was first hit, the impact has also been severe on corporate Europe.

Fiat Chrysler (MI:FCHA) said on Monday it was halting production through March 27 at the majority of its plants in Europe due to the coronavirus crisis disrupting the economy. Shares dropped 10%.

The owner of British Airways and easyJet (LON:EZJ), Europe’s no.3 and no.4 airlines, said they would cut capacity drastically to try to survive the coronavirus outbreak which has stopped people traveling around the world.

IAG (LON:ICAG), the owner of BA, said it would cut its flying capacity by at least 75% in April and May and its outgoing boss Willie Walsh would defer his retirement. Shares fell 26%.

EasyJet said it could ground the majority of its fleet on a rolling basis, and its chief executive Johan Lundgren called for coordinated government backing to help the aviation industry survive. Shares fell 28%.

Later Monday, European Union finance ministers are set to discuss the impact of the coronavirus and measures to restart their economies. This will take place by video call later Monday rather than in person after France and Spain joined Italy in imposing lockdowns on tens of millions of people.

A focus of discussions is likely to be the European Commission plan unveiled on Friday to boost spending on sectors of the economy hit by the coronavirus and to let EU nations run bigger deficits to help cushion businesses.

Additionally, there will be a Group of Seven teleconference at 1400 GMT to discuss the health crisis.

Oil markets continued to be hammered by both demand and supply shocks Monday. Measures to curtail the advance of the coronavirus have severely limited demand for the product at the same time as oil’s major producers are embarking on a destructive price war.

AT 03:30 AM ET (0830 GMT), U.S. crude futures traded 04.9% lower at $30.54 a barrel and the international benchmark Brent contract fell 6.7% to $31.59.

Additionally, gold futures rose 1,4% to $1,537.55/oz, while EUR/USD traded at 1.1209, up 0.9% on the day.

Stocks – Europe Slumps Despite Fed Moves; Autos, Airlines Hit Hard

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