Dow falls into bear territory as COVID-19 outbreak declared a pandemic

Markets fell on Wednesday as the World Health Organisation declared that the COVID-19 outbreak is a pandemic.

US stocks plunged. The Dow Jones Jones Industrial Average sank 5.9 percent, plunging it into bear market territory, while the S&P 500 fell 4.9 percent.

Elsewhere, the STOXX Europe 600 fell 0.7 percent and the Nikkei 225 tumbled 2.3 percent.

European markets were supported by an emergency rate cut by the Bank of England but some analysts are unimpressed by the move.

“If we are now trying to encourage people to stay at home and not travel, what on Earth is a rate cut supposed to do?,” said Jim O’Neill, chair at UK thinktank Chatham House.

Indeed, Deutsche Bank Securities’ chief economist Torsten Slok thinks it is “too early to put risk on”, adding that “the policy response is not quite being there yet”.

Similarly, Invesco’s chief global market strategist Kristina Hooper told CNBC on Wednesday: “I don’t think we’ve hit a bottom yet.”

“What could cause a bottom, could be a powerful catalyst for stocks to move up, of course, is if we actually get appropriate fiscal policy,” she said.

David Kostin, Goldman’s chief equity strategist, appears to be confident that that will come.

“By year-end, economic and earnings growth will be accelerating, the fed funds rate will be at the zero lower bound, and the impact of any fiscal stimulus will be flowing through to consumers. Under this scenario, equities will appear attractive relative to bonds and cash,” he said.