Financial markets spasmed, sending U.S. stocks down more than 5% and Bloomberg’s dollar index up to a record, as the economic fallout from the pandemic outpaced the massive response from Governments and Central Banks. The S&P 500 fell as much as 9.8%, before a late-session bounce trimmed the decline, with investors craving more government spending to offset the impact from the virus. After markets closed, the Senate cleared the second major Bill responding to the Coronavirus pandemic and White House Economic Adviser Larry Kudlow said the government might take an equity position as part of an aid package. Futures on the S&P 500 that trade till 4:15 p.m in New York trimmed declines. Sovereign debt tumbled around the world and municipal bonds extended the deepest rout since 1987 as markets braced for the potential flood of spending. Oil sank 24% to an 18-year low. The US Dollar strengthened a seventh straight day. The Pound hit its lowest level against the greenback since 1985. Dollar-funding markets remained strained, although improved from extreme levels in recent days. Stocks fell to session lows after Trump offered few details at a press briefing on the specifics his Treasury Secretary is discussing with Congress. The Federal Reserve dusted off crisis-era programs to stabilize financial markets. The planned U.S. stimulus could amount to $1.2 trillion, aiming to stave off the worst impact of a crisis that already looks set to plunge many of the world’s economies into recession. Meantime, the Federal Reserve reintroduced additional crisis-era tools to stabilize financial markets. Those responses came after stresses appeared in the short-term funding markets. Late last night, the European Central Bank launched an extra emergency bond-buying programme worth 750 billion euros ($820 billion) in the latest attempt to calm markets and protect a Euro-Area economy struggling to cope with the Coronavirus pandemic. The decision in an unscheduled meeting on Wednesday night is the latest in an escalating global response to an outbreak widely seen driving the economy into recession. ECB President Christine Lagarde reinforced the message that policy makers will do all they can, saying there are “no limits to our commitment to the Euro.” European bond markets surged from the open this morning, with Italian 10-year yields dropping over 100 basis points, and the gap between the debt of core nations and more stressed ones — a key indicator of stress — narrowed. Italy’s 10-year yield spread over Germany shrank by 80 basis points to 186 basis points, having soared over 300 basis points Wednesday. Greek bonds, which will be bought for the first time, saw yields drop 45 basis points. European stock index futures swung between gains and losses though, and the currency was down 0.2% at $1.0894 at 8:29 a.m in Frankfurt.
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