Financial markets are reflecting growing fears the coronavirus pandemic is set to inflict deeper economic damage than initially feared.
Stock market values took a hit globally on Wednesday – applying brakes to the tentative recovery seen since the share slump that began in February as COVID-19 took hold in Italy.
Analysts pointed to a slew of negative news from the likes of the International Monetary Fund, which is forecasting the worst world recession since the Great Depression of the 1930s, and projections of prolonged damage among fund managers.
Most notable, on Wednesday, was an International Energy Agency forecast that demand for oil would fall by 9.3 million barrels per day this year – leaving it at levels not seen since 1995 – sending prices back to fresh 18-year lows.
The declines saw US crude trading below $20 a barrel while Brent crude was at $27 – a fall of 7%.
The price has plunged over the past 48 hours despite the so-called Opec+ group of oil-producing nations agreeing, at the weekend, output cuts to prop up costs.
There was also fresh data out of the United States that showed a record rate of decline for retail sales.
The FTSE 100 followed falls in Asia and was trading almost 3% down in late afternoon deals at 5,627 – leaving the index still 25% off in the year to date.
Industrial and aviation stocks were among those worst hit, reflecting uncertainty on when full lockdown restrictions outside of China are likely to be lifted.
Neil Wilson, chief markets analyst at Markets.com, said the pessimistic market mood reflected concerns that the effects of the crisis could drag on for years.
He wrote: “According to Bank of America’s latest Global Fund Manager Survey, just 15% see a V-shaped recovery.
“Over half (52%) see a U-shaped recovery, where the long line along the bottom stretches on for some time, perhaps years.
“A fifth (22%) see a W-shaped recovery – possibly sparked by a sharp bounce back and second or third wave of infections – and 7% see the dreaded L – a long depression like the 1930s and no real recovery.
“The biggest tail risk is a second wave of infections, which makes the speed at which you reopen economies key.”
Markets in France and Germany were more than 3% lower while top US indices were 2% down in early trading on Wall Street.
The dollar – often a safe haven in times of trouble – surged against both sterling and the euro, hitting $1.24.
That is a fall of more than 1% for the UK currency.