America’s central bank the Federal Reserve slashed its benchmark interest rate to near zero overnight but it has not been enough to soothe market jitters.
The emergency action was taken to help the US economy come through the COVID-19 outbreak which is currently gripping the world.
The Fed also said it would expand its balance sheet by at least $700bn (£565bn) in the coming weeks but the FTSE 100 in the UK fell more than 5% in the first few minutes after its Monday opening.
Markets in South East Asia, among the first to react to the move, also seemed unconvinced.
Malaysia’s benchmark index slid 3.4% to near a 10-year low after the country’s prime minister said the tourism sector had probably suffered nearly $800m (£647m) in losses to the end of February because of the virus.
In the Philippines, shares started to rebound after losing as much as 7.6% in early trading but they were still in the red.
Singapore’s shares were down 3.4%, set for a fourth consecutive day of losses and Indonesian stocks were down by 4%.
Sydney’s benchmark fell 7%, Hong Kong’s Hang Seng lost 2%, Shanghai was down 0.5% and Tokyo was flat.
On Wall Street, futures for the benchmark S&P 500 index fell 5% on Sunday night and triggered a halt in trading.
Vishnu Varathan, a senior economist at Mizuho Bank, said: “Ironically, markets might have perceived the Fed’s response as panic, feeding into its own fears.
“Despite whipping out the big guns (and jumping the gun) the Fed appears to lack the silver bullets; falling short of being
the decisive backstop for markets.”
China said industrial output had contracted at its sharpest pace in 30 years during the first two months of the year.
It has seen the bulk of infections and deaths as a result of COVID-19 and is just starting to get its outbreak under control, following months of lockdown in many of its cities.
Earlier, US President Donald Trump said the Fed’s decision, which cuts the rate by a full percentage point to a target range of 0% to 0.25%, was “very good news”.
The US central bank said that rate would remain until it feels confident the economy has weathered recent events.
It has also dropped its requirements that banks hold cash reserves in another move to encourage lending.
Other central banks around the world, including the Bank of England, have said they would co-ordinate to ease liquidity in an attempt to blunt the economic impact of the virus.
A statement from the governor of the Bank of England, Mark Carney, and incoming governor, Andrew Bailey, said such action would “improve global liquidity by lowering the price and extending the maximum term of US dollar lending operations”.
They added: “These new operations will help ease strains in global funding markets, thereby supporting the supply of credit to households and businesses.”
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