By Avantika Chilkoti and Frances Yoon 

Global stocks fell Wednesday after President Trump issued a stark new warning on the spread of the novel coronavirus in the U.S., reviving concerns about the potential damage to the world's largest economy.

Futures tied to the Dow Jones Industrial Average dropped 3.7%, suggesting that blue-chip stocks will decline a day after U.S. equities closed out their worst quarter since the financial crisis. European stocks also fell, with the pan-continental Stoxx Europe 600 index retreating 3.3%.

Mr. Trump warned that the U.S. could face as many as 240,000 deaths as he asked Americans to brace for an unprecedented crisis in the days ahead. The nation has more confirmed cases than any other country, with more than 189,000 infections, and projections from the University of Washington show the illness could result in 2,214 deaths a day at the peak in two weeks.

"We're slowly peering through the fog and trying to see how bad things will become, but essentially we are flying blind," said Peter Dixon, a senior economist at Commerzbank. "It's very clear this is going to be the biggest sudden stop in measured history: the economy is just going to hit the buffers."

As investors turned to assets that are perceived to be the safest, the yield on the 10-year U.S. Treasury note ticked down to 0.611%, from 0.691% Tuesday. Yields drop as bond prices climb.

The ICE Dollar Index, which tracks the dollar against a basket of currencies, ticked up 0.7% after the Federal Reserve took fresh steps to alleviate the stress in currency markets. On Tuesday, the Fed said it would launch a temporary lending facility that would allow foreign central banks to convert their holdings of Treasury securities into dollars.

In recent weeks, the rush for the exits in U.S. government bond markets has included heavy selling by foreign investors, with overseas holdings of U.S. assets tumbling by $100 billion to $2.9 trillion in a matter of weeks.

"It seems the most acute phase of that is now behind us, but there are other investors who want to reduce their Treasury positions," said Mark Cabana, head of U.S. rates strategy at Bank of America Global Research.

Ahead of the opening bell in New York, Marriott International dropped almost 7%. On Tuesday, the hotel chain said it is investigating a data breach that exposed up to 5.2 million customers' personal information in what is at least the third cyber incident for the group in 18 months.

In commodities, Brent crude, the global oil benchmark, dropped 4.4% to $25.18 a barrel after an agreement between major oil-producing nations limiting the output lapsed overnight. Saudi Arabia is preparing to flood oil markets as early as Wednesday as the kingdom forges ahead with a price war with Russia. Brent crude has plunged roughly 62% so far this year.

In Europe, banks and finance companies were among the worst performing stocks. The U.K.'s biggest lenders said late Tuesday that they would shore up capital by canceling or delaying dividend payments amid concern about their ability to absorb a potential rush of bad loans as households and companies are impacted by the pandemic. Dividends and share buybacks have been a main driver of banking stocks across the region in recent years.

Shares in HSBC Holdings tumbled 9.1%, the most since March 2009, while Standard Chartered fell 8.5%. Barclays, Lloyds Banking Group and Royal Bank of Scotland Group also retreated. The Bank of England's request to the lenders to cancel the payouts followed a similar ban from the European Central Bank on Friday.

The euro stumbled almost 1% against the U.S. dollar. A series of business surveys released Wednesday showed that factories across Asia and Europe cut output and jobs at the fastest pace since the global financial crisis. The figures painted an almost uniform picture of sharply declining production, falling new orders and contracting payrolls.

The main exception was China, which saw a slight rebound in activity as its economy began to thaw out, having been the first to be frozen.

In Asia, Japan's Nikkei 225 lost 4.5% and Hong Kong's Hang Seng closed 2.2% lower. Meanwhile, Australia's ASX 200 gained 3.6%.

Later in the day, the Institute for Supply Management's March manufacturing survey could provide clues about how disruptions to supply chains and business shutdowns are affecting manufacturing activity in the U.S.

U.S. lawmakers have already passed three major pieces of legislation to keep the virus outbreak from throwing the economy into the deepest downturn since the Great Depression, while the Fed slashed its benchmark interest rate to near zero.

"In the U.S., we're at the beginning of a downturn," said Steven Englander, global head of G-10 foreign-exchange research and North America macro strategy at Standard Chartered Bank. "We're likely to see more unemployment, and the early bottom could come in May, but that is very speculative. For that to happen, we need a lot of good luck and serious implementation of economic and health-care policy."

While stimulus packages are good for the economy, and would help American employees get through the next two months, there might be a need for "trillions more," Mr. Englander said. On Tuesday, Mr. Trump called for a new infrastructure-focused spending bill worth $2 trillion.

Write to Avantika Chilkoti at and Frances Yoon at


(END) Dow Jones Newswires

April 01, 2020 08:46 ET (12:46 GMT)

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