Shares around the world tumbled yesterday after the American economy suffered its biggest decline in post-war history and Donald Trump called for the presidential elections to be delayed.
The devastation caused by the Covid-19 pandemic is now becoming clear and major stock markets in Britain, Europe and the US fell by as much as 3.5 per cent, wiping billions of pounds off the value of pensions and other savings.
The sell-off came after official figures published in Washington showed economic output in the US contracted at an annualised rate of 32.9 per cent in the second quarter of the year.
That was the steepest decline since the US government started keeping records in 1947 – and more than three times worse than the biggest previous slump of 10 per cent in 1958.
On a quarterly basis – the way output is reported in other countries – the US economy was down 9.5 per cent. A second report showed another 1.4m Americans claimed unemployment benefits last week, taking the total to around 17m.
The rise in jobless claims stoked fears that a nascent economic recovery is under threat from a resurgence in cases of coronavirus.
Underlining the global nature of the crisis, separate figures showed the German economy also shrank at the fastest rate on record, crashing 10.1 per cent between April and June.
‘Now it’s official, it’s the recession of a century,’ said Dekabank economist Andreas Scheuerle.
The collapse in output in the US, the world’s largest economy, and Germany – the fourth biggest – laid bare the cost of forced shutdowns and stay-at-home orders designed to slow the spread of coronavirus.
The Bank of England has warned Britain is suffering its deepest recession for 300 years.
With concerns mounting that the recovery will be slow – particularly if the much-feared second wave of infections hits – investors were further spooked by a tweet from Trump calling for the presidential elections in November to be delayed.
In London, the FTSE 100 index closed below 6000 for the first time since May, down 2.3 per cent, or 141.47 points, to 5,989.99.
The dollar fell sharply against currencies around the world, with the pound rising above $1.30 for the first time since early March.
Sterling has gained more than 5 per cent against the greenback so far this month as investors fret over the outlook for the US economy and its handling of the pandemic. The Federal Reserve central bank this week warned that the fate of the US economy would ‘depend significantly on the course of the virus’.