19/3/2020 (74) Fear grips markets as faith in intervention runs out | Financial Times

Coronavirus
Fear grips markets as faith in intervention runs out
Sterling hammered as London prepares for lockdown and oil hits 17-year low

London could face a lockdown in an effort to counter coronavirus © Charlie Bibby/FT

Katie Martin, Chris Giles and Alex Barker in London 11 HOURS AGO

Global markets were rocked in a panic-ridden day of trading as forced selling and a
loss of faith in government intervention deepened the global economic crisis triggered
by the coronavirus pandemic.

As London prepared to go into lockdown to try to control the disease, which has
infected at least 200,000 people and claimed more than 8,000 lives worldwide, the
S&P 500 fell about 5 per cent and oil prices hit the lowest level in nearly 17 years.
Sterling tumbled almost 5 per cent against the dollar to its lowest point since the
1980s.

Indiscriminate selling early on Wednesday in government bonds that are typically

considered a safe harbour in times of stress also indicated that funds were scrambling
to keep afloat or pay investors back their cash.

“A lot of people need cash and they’re liquidating the only thing that they can,” said
Mike Riddell, a portfolio manager at Allianz Global Investors.
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19/3/2020 (74) Fear grips markets as faith in intervention runs out | Financial Times
e dde , a po t o o a age at a G oba vesto s.

Britain was hit especially hard in the rout. The slump in sterling, which took it at one
stage to below $1.15 against the dollar, came even after the Bank of England pledged
to pump unlimited quantities of money into the economy via its new commercial
paper facility.

The sharp declines showed that this week’s multitrillion-dollar rescue effort by
western governments had failed to calm markets.

The US Treasury on Wednesday proposed to send $500bn directly to Americans in

two payments in April and May in a bid to limit the economic damage from
coronavirus. The measure would require approval of Congress.

The prospect of slumping energy demand sent the US oil benchmark WTI crude down
more than 15 per cent to $23 a barrel, a 17-year low. Brent, the international
benchmark, dropped 9 per cent to below $25 a barrel.

Some analysts said that the UK’s initially measured approach to the virus had
weighed on the pound. “The UK is really at odds with the responses we’ve seen in
other European countries and I think that’s one of the reasons why sterling is so out
of favour,” said Silvia Dall’Angelo, a senior economist at Hermes Investment
Management in London.

Paul Jackson, global head of asset allocation

Coronavirus business
research at Invesco, said that efforts to fight
update
the crisis had not been rewarded in currency
markets because of the UK’s departure from
the EU, which he said had left the UK
economy in a compromised position. “If you
are already weakened by an underlying
condition . . . then the risks are greater,” he
How is coronavirus taking its toll on said.
markets, business, and our everyday

lives and workplaces? Stay briefed Andrew Bailey, the new BoE governor, said
with our coronavirus newsletter.
the central bank would print money in order
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19/3/2020 (74) Fear grips markets as faith in intervention runs out | Financial Times
t e ce t a ba wou d p t o ey o de
Sign up here to offer short-term loans to investment-grade
companies in the form of a new and unlimited
commercial paper facility.This facility is, in
effect, an unlimited form of quantitative easing.

“We didn’t put a limit on [the facility]”, said Mr Bailey, highlighting that the central
bank wanted to provide as much support as companies needed.

In Germany, chancellor Angela Merkel declared the crisis its biggest since the second
world war, saying Germans had to stick to the new rules of social distancing if there
was to be any prospect of slowing the spread of the virus.

Divisions over crisis-fighting efforts were laid bare at the European Central Bank,
which took the unusual step of rebuffing comments by one of its own governing
council members. The bank issued a statement contradicting a claim by Robert
Holzmann, the head of Austria’s central bank, that monetary policy had reached its
limits. “Monetary policy cannot cover up the problem,” Mr Holzmann told Austria’s
Der Standard newspaper.

Read more about the impact of coronavirus

• The latest figures as the outbreak spreads
• Containing coronavirus: lessons from Asia
• How dangerous is the coronavirus and how does it spread?

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