Global stocks and oil prices tumbled on Wednesday after the International Monetary Fund said the world’s economy will suffer its worst year since the Great Depression of the 1930s due to the coronavirus pandemic.
Indexes in London and Frankfurt were down about 2 per cent and benchmarks in Shanghai, Tokyo, Hong Kong and Sydney closed lower. Wall Street futures were down by over 1.5 per cent. The price of oil hit a new 18-year low the International Energy Agency said demand will drop by 9.3 million barrels per day in 2020 overall. Demand in April will hit its lowest since 1995, it said. The drop came despite an agreement over the weekend among OPEC and other oil producers to cut output to reflect collapsing demand.
Benchmark US crude lost 40 cents to USD 19.71 per barrel. Brent crude, the international standard, declined USD 1.02 to USD 28.58 per barrel in London. The IMF said this year’s global economic output will shrink by 3 per cent, a bigger loss than 2009’s 0.1 per cent decline during the financial crisis. That was a sharp reverse from the Fund’s January forecast of 3.3 per cent growth before the virus prompted governments to shut down factories, travel and other industries. “The IMF forecast a deep economic winter,” said Hayaki Narita of Mizuho Bank in a report. The IMF’s chief economist, Gita Gopinath, said the loss to global gross domestic product, the broadest gauge of economic output, could amount to USD 9 trillion, or more than the economies of Germany and Japan combined. In Europe, London’s FTSE 100 lost 2.3 per cent to 5,661 and the DAX in Frankfurt declined 2.1 per cent to 10,473. The CAC 40 in France retreated 1.9 per cent to 4,437.
On Wall Street, the future for both the benchmark S&P 500 and the Dow industrials sank 1.6 per cent. On Tuesday, the S&P climbed 3.1 per cent. The index surged 12 per cent last week but is about 16 per cent below its February all-time high.