New US interest rate cut and more countries closing borders contribute to global markets crash on Monday
On Monday at 3:01 pm, the Ibovespa (B3), the main stock exchange index, fell 13.56%, to 71,469 points. Earlier, it had fallen by more than 14%, falling 70,855 points. And trading was interrupted right at its opening.
In addition to the coronavirus pandemic, doubts in global markets about the effectiveness of the measures announced by the Federal Reserve (FED) and other central banks are also contributing to the declines in stock markets around the world.
This morning, at 10:24 am, when the index fell by 12.53%, the “circuit breaker” was activated – the B3 mechanism that interrupts all trading for 30 minutes when the drop totals 10%. If the drop reaches 15% throughout the day, trading is interrupted again, and in this case for 1 hour.
Even before the opening of trading, the Ibovespa futures contract was already down 10%, signaling that a new “circuit breaker” would occur. It was the 5th time in 6 trading sessions that trading was interrupted on the Ibovespa.
Biggest drops of the day
Airlines were among the most affected companies among Ibovespa stocks. Due to the effects of the pandemic, the travel sector is coming to a standstill. And the rise in the dollar also contributed to the loss. Azul was down 24.28% and Gol lost 18.89%. CVC Brasil fell 23.45% and Petrobras fell 13.44%.
Last Friday (13), the Ibovespa closed up 13.91%, at 82,677 points. During the week, it had accumulated a drop of 15.68% – the worst weekly performance since October 2008. In 2020, the accumulated loss on the Stock Exchange has already reached 35%.
External scenario
The Federal Reserve (Fed, the central bank of the United States) announced the day before, this Sunday, that it would reduce the interest rate in the United States to the range of 0.% to 0.25%, which worsened fears about the size of the economic impact of the pandemic. It was the second interest rate cut in less than two weeks. The institution also announced a program to purchase US$$ 500 billion in Treasury bonds and US$$ 200 billion in mortgage securities.
The dollar is operating strongly on the day, reaching R$ 4.98 at the opening.