[New York Close] Trump and Corona Collaboration 'Black Thursday' (Summary)

[Asia Economy New York=Correspondent Baek Jong-min] The announcement by U.S. President Donald Trump of a ban on arrivals from Europe has caused a massive aftershock in the financial markets. Despite intervention by the Federal Reserve (Fed), the New York Stock Exchange recorded its largest single-day drop since the 'Black Monday' crash of 1987, when the market plunged 22% in one day.

[Image source=AP Yonhap News]

On the 12th (local time) at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 9.99% (2,352.60 points) to close at 21,200.62, the S&P 500 dropped 9.51% (260.74 points) to 2,480.64, and the Nasdaq declined 9.43% (750.25 points) to finish at 7,201.80.

On that day, the New York Stock Exchange triggered a 'circuit breaker' after a 7% plunge immediately after opening, halting trading for 15 minutes. This circuit breaker reappeared after three trading days, following its activation on the 9th. However, the circuit breaker proved ineffective as the market extended its losses after trading resumed.

Despite events driven by the U.S. and European central banks amid the shockwave of the U.S. ban on arrivals from Europe to block the spread of the novel coronavirus disease (COVID-19), investor anxiety could not be overcome.

U.S. President Donald Trump announced in a statement the previous day that entry into the United States from European countries, excluding the United Kingdom and Ireland, would be banned for 30 days. This measure is evaluated to have severely worsened investor sentiment by stoking fears of a massive economic impact on both regions.

The economic support measures mentioned by President Trump in his speech the previous day also failed to satisfy the market. His directive for low-interest loans to small and medium-sized enterprises affected by COVID-19 and his plan to request Congress to increase the fund by an additional $5 billion could not ease market concerns.

There remain question marks over the key economic measure of payroll tax cuts. He only stated, "I expect Congress to seriously consider this."

As market instability intensified that day, the Federal Reserve (Fed) stepped in again as a problem solver but failed to narrow the losses. The New York Fed announced a surprise injection of $1.5 trillion over two days, the 12th and 13th, to stabilize liquidity in the short-term funding markets. The New York Stock Exchange briefly reduced its losses immediately after the announcement but soon returned to previous levels.

The European Central Bank (ECB) also dampened investor sentiment by not cutting interest rates as expected. On that day, the ECB kept the benchmark interest rate at 0.0% and the deposit rate at minus (-) 0.5%. Instead, it introduced a long-term refinancing program and temporarily expanded quantitative easing (QE) by an additional $120 billion until the end of the year, but this was insufficient to calm market turmoil.

As anxiety spread, the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known as the fear index, surged 40.02% from the previous trading day to 75.47.

Oil and gold prices also remained weak. Due to expected demand decreases from reduced flights between the U.S. and Europe, West Texas Intermediate (WTI) crude oil closed down 4.5% ($1.48) at $31.50 per barrel.

The dollar index rose nearly 1%, and gold closed down 3.2% ($52) at $1,590.30.

This content was produced with the assistance of AI translation services.