Global stock indices under pressure as U.S Fed’s rate cut fails to calm financial markets

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Updated on Aug 12, 2024

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Global stock indices under pressure as U.S Fed’s rate cut fails to calm financial markets.
FTSE 100 trades 6.9% down on Monday, FTSE 250 12% down, and AIM All-Share 11% down.
Analysts expect a 4.5% decline in Nasdaq and Dow Jones on Monday and a 4.8% decline in S&P500.

The U.S Federal Reserve took the drastic step of cutting
rates for the second time in March in an emergency meeting on Sunday to 0.25% in an attempt to tackle the economic impact of Coronavirus. As the strategy failed to calm the financial markets, UK’s benchmark FTSE 100 index dropped below 5,000 points on Monday morning for the 1^st time in almost a decade.

Losing 367.51 points on Monday, FTSE 100 index traded at 4,998.60 in the morning session that marked a 6.9% decline for the day. The aforementioned level was last seen in FTSE 100 index in 2011.

The broader index, FTSE 250, on the other dropped by 12% or 1,887.23 points on Monday and traded at 13,674.77 in the morning session. AIM All-Share, on the other hand, was last seen trading at 660.26 this morning that translates to an 11% decline.

With sharply rising cases of Coronavirus across the globe, the health emergency is wreaking havoc on the global financial markets. On Monday, the Cboe UK 100 dropped to 8,448.31 (6.3% decline). The broader Cboe UK 250 index saw a wider drop of 13% to 11,865.18. Lastly, the Cboe Small Companies index was reported 5.9% down at 9,223.83.

The impact of the Coronavirus on financial markets is by no means confined to the UK. Other European equities such as CAC 40 (benchmark French stock market index) rallied 9.2% down while an 8.0% drop in DAX 30 (Frankfurt’s blue chip stock market index) was reported.

Wall Street Is Expected To Follow The Downward Trend On Monday

According to the experts, Wall Street is also expected to open sharply down on Monday. As per the estimates, a 4.5% decline in Dow Jones and Nasdaq while an even wider 4.8% decline in the benchmark S&P 500 index is likely. Dow Jones closed at 22,932.14 on Friday, Nasdaq at 87, and S&P 500 at 2,490.47.

In the United States, analysts see the airline industry to weigh the hardest on the Wall Street. In pre-market trading, Delta Air Lines was reported 15% down while United Airlines slumped by 17%.

Following Trumps’ announcement that restricted travel from Europe, airlines including American, EasyJet, Ryanair, IAG, Air France-KLM, Wizz Air, and many more have announced broader than expected jobs, costs, and flights cut in the upcoming weeks. The global airline industry is also seeking financial support from respective governments to tackle the economic impact of Coronavirus.