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United States stock indices They closed down sharply on Tuesday in fear that the coronavirus will lead to a global recession. The Federal Reserve (Fed) decision to cut its reference rate by 50 basis points did not serve to reverse the fears present in the markets: according to provisional closing results, the Dow Jones Industrial Average ended with a decrease of 2.97%, to 25,913.41 units, while the technological Nasdaq yielded 2.99% to 8,684.09.
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Specifically, the Fed decided to cut reference interest rates by half a point, to leave them in a range between 1% and 1.25%, in order to boost economic activity and combat the damaging effects of coronavirus expansion in the world economy.
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The US central bank took this decision by surprise after a meeting with the other partners of the G7, which brings together the most developed economies in the world, who reaffirmed their commitment to use all the right tools to deal with the risks linked to the worldwide expansion of the coronavirus.
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The fall largely reverts the rebound that had taken place the day before, when the main indexes registered a rise close to 5 percent -the Dow had registered the highest nominal rise in its history, with 1,200 points- precisely because of the expectation generated by a possible stimulus package to counteract the negative effects of the epidemic.
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For now, they were not enough to underpin prices or the Fed’s decision or the few definitions at the G7 meeting, which was willing to take steps to fight the coronavirus, although without explicitly committing to take any decision.
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“Given the possible impacts of coronavirus on global growth, we reaffirm our commitment to use all appropriate political tools to achieve strong and sustainable growth and protect against downside risks,” the G7 said in a statement.
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He added that G7 finance ministers “are ready to take action, including prosecutors when appropriate, to assist in the response to the virus and support the economy during this phase”.
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The central banks of the G7 “will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system,” the statement concludes.
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In parallel, the growing demand for US Treasury bonds, a natural refuge in circumstances of uncertainty, raised the prices of these securities in the secondary market, with the consequent fall in the rates of return, below 1% for the first time in history.
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