Coronavirus: Global stocks fall after US Fed predicts 'long road' to recovery

Edmund Heaphy
Finance and news reporter
US Federal Reserve chair Jerome Powell (Jacquelyn Martin/AP Photo)

Stocks fell across the world on Thursday after the Federal Reserve warned that it expected there to be a “long road” to economic recovery in the US, fueling fears about a protracted return to growth in the global economy.

The central bank on Wednesday left interest rates steady at near-zero levels, projecting elevated US unemployment for years and a 6.5% fall-off in US economic output in 2020.

In the US, stocks opened sharply lower after the Labor Department said that an additional 1.5 million Americans filed for unemployment benefits last week.

The S&P 500 (^GSPC) was down by around 2.3%. The Dow Jones Industrial Average (^DJI) was down by around 2.7%, while shares on the Nasdaq (^IXIC) fell by around 2.1%.

READ MORE: Another 1.5 million Americans file for unemployment benefits

In Europe, the pan-European STOXX 600 index (^STOXX) fell by around 3.2%, setting it up for its worst day since April. London’s FTSE 100 (^FTSE) was down by around 3%.

Germany’s DAX (^GDAXI) declined by around 3.1%, while France’s CAC 40 (^FCHI) was 3.4% in the red.

“Last night’s Fed meeting turned out to be every bit as dovish as was expected, with the US central bank painting a fairly subdued outlook for the US economy,” said Michael Hewson, the chief market analyst at CMC Markets UK.

“While the main focus was on the downgrades to its economic predictions, and the length of the recovery, what was particularly notable was [Jerome Powell’s] comments on the jobs market, inequality and financial markets,” Hewson said.

“He said that inequality was likely to continue for the next four decades, and that millions of people could well be out of work for some time.”

The declines in Europe and the US followed sharp losses for stocks in Asia.

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China’s SSE Composite Index (^SSEC) fell by 0.78% on Thursday, while the Hang Seng (^HSI) was down by 2% in Hong Kong at market close.

Japan’s Nikkei (^N225) closed more than 2.8% in the red, in its worst decline since the beginning of May.

The KOSPI Composite Index (^KOSPI) in South Korea fell by around 0.86%, while Australia’s ASX 200 (^AXJO) was down by more than 3%, its worst performance since February.