World markets fell Wednesday, a day after the International Monetary Fund predicted that global economic output would shrink by 3% in 2020 as a result of shutdowns caused by a new strain of coronavirus.
Major U.S. market indexes were all down at closing. The Dow Jones industrial average fell 445 points, or 1.9%, to close at 23,504. The S&P 500 dipped 62 points, or 2.1%, to end the session at 2,783. The Nasdaq Composite Index fell 122 points, or 1.4%, to close near 8,393.
European markets also recorded losses after two days of gains, following news of the mounting death toll from COVID-19. Britain’s FTSE, the CAC-40 in Paris and the DAX in Frankfurt all ended Wednesday down more than 3%.
The selloff followed a mixed trading session in Asia, which ended with losses in Australia, Hong Kong and Shanghai. Japan’s Nikkei was flat.
Brief rally
Financial markets had rallied over the past two days with cautious optimism over a decline of new coronavirus infections and deaths in some countries. But Tuesday saw an increase in deaths and new COVID-19 cases in Britain, France, some Eastern European countries, Sweden, Japan and the United States.
More than 2 million people worldwide have been infected with the novel virus and more than 134,000 have died.
U.S. stocks also plunged Wednesday as U.S. crude oil ended below $20.
Global demand for oil is expected to be the lowest ever thanks to the lockdowns enforced around the world to contain the pandemic. Some countries, including China, India, South Korea and the United States, are expected to buy cheaper oil to keep as strategic reserves.
The International Monetary Fund said Tuesday that global economic output would shrink by 3% in 2020, with nearly all economic activity shut down because of the novel coronavirus pandemic. IMF chief Kristalina Georgieva said half of the world had asked the IMF for bailouts. She said the global economy could expand in 2021 if the virus was contained.
G-20 suspends debt payments
Member nations of the G-20 group of leading economies have agreed to suspend debt payments owed to them by some of the world's poorest countries. The agreement covers money that is due to be paid to G-20 governments up to the end of 2020.
The U.S. government has provided bailout funds for small businesses hit by the pandemic, and some hedge funds are now looking into profiting from it, too. Banks and insurance companies do not qualify for small-business loans, but the guidelines are not clear regarding hedge funds. Debate is raging on Wall Street about whether this is ethical or even good for the business, with some managers asking why a hedge fund that collects management fees would seek a government handout.
While economic losses will be felt in most sectors, some people will profit from the economic shutdown.
Amazon boss Jeff Bezos, the richest man in the world, has added a reported $24 billion to his fortune as closed stores sent many people to shop online.
