Financial markets reeled on Thursday as stocks dived and oil slumped after US President Donald Trump took the dramatic step of banning travel from Europe to stem the spread of coronavirus, threatening more disruptions to trade and the world economy.

With the pandemic wreaking havoc on daily life of millions worldwide, investors were also disappointed by the lack of broad measures in Trump's plan to fight the pathogen, prompting traders to bet of further aggressive easing by the Federal Reserve.

Euro Stoxx 50 futures plunged 8.3 per cent to their lowest levels since mid-2016. They were last down 6.9pc while investors rushed to safe-haven assets from bonds to gold to the yen and the Swiss franc.

US S&P 500 futures plummeted as much as 4.9pc in Asia and last traded down 3.6pc, a day after the S&P 500 lost 4.89pc, leaving the index on the brink of entering bear market territory, defined as a 20pc fall from a recent top.

MSCI's broadest gauge of world shares, ACWI, could follow suit, having fallen 19.2pc so far from its record peak hit only a month ago.

"The travel ban from Europe has definitely taken everyone by surprise," said head of Asia Research at ANZ in Singapore Khoon Goh.

"Already we know the economic impact is significant, and with this additional measure on top it's just going to multiply the impact across businesses. This is something that markets had not factored in [...] it's a huge near-term economic cost."

Those fears left a trail of red across many markets.

Japan's Nikkei crumbled 4.4pc to a trough last seen almost three years ago while MSCI's broadest index of Asia-Pacific shares outside Japan fell 4.7pc.

Australian shares plunged 7.4pc to the lowest level in more than three years while Seoul's Kospi fell 4.8pc to four and a half year lows with massive selling prompting a brief trade halt. Thai shares sank 8.8pc to 8-year lows.

Trump announced on Wednesday the United States will suspend all travel from Europe, except from the United Kingdom, to the United States for 30 days starting on Friday. However, Trump said trade will not be affected by the restrictions.

He also announced some other steps, including instructing the Treasury Department to defer tax payments for entities hit by the virus.

"For those who had been hoping for measures to offset likely fall in consumption, it was a disappointment," said chief global strategist at Daiwa Securities Hirokazu Kabeya.

"There was no talk of payroll tax cuts.”

In the money market, traders further raised their expectations of an aggressive US rate cut, underlining the fears in markets of a deepening economic downturn even as the Federal Reserve had stepped in last week with an emergency easing.

Fed fund rate futures are now pricing in a large possibility of a 1.0 percentage point cut, rather than 0.75 percentage point, at a policy review on March 17-18.

Pandemic

The World Health Organisation (WHO) described the outbreak as a pandemic for the first time on Wednesday though an official said the move does not change the agency's response.

The highly infectious disease that virtually shut down most parts of China for much of February is spreading rapidly in Europe and increasingly in the United States, disrupting many corners of life from education to sports, entertainment and dining.

The US National Basketball Association was the latest to be hit by the pandemic as it announced it will suspend the season until further notice.

Investors worry how much of an effect economic policies can have in turning around the global economy given the widespread restrictions on daily life, travel and disruptions to businesses.

A case in point was Britain, where the FTSE stock index hit near four-year lows on Wednesday as investors doubted whether the $39 billion spending plan and the Bank of England's 0.5 percentage point rate cut announced on Wednesday would be enough to counter the shock from the outbreak.

The British pound last stood at $1.2807 near this week's low.

"At this stage, we all need to take it on the chin and bear it for a few months (in terms of economic disruption)," said East Asian Head of Global Markets Research at MUFG Bank in Hong Kong, Cliff Tan.

"Here in Hong Kong and China we have been through it and know what's it like to shut down [...] I don't think the market has fully caught on with how this disruptive this could be for the economy."

Safe-haven assets were back in favour, though many of them were still below recent peaks, which some market players suspect reflects a desperate bout of profit-taking to make up for losses suffered elsewhere.

Gold edged up 0.1pc at $1,636 per ounce but still stood well below Monday's high above $1,700.

The 10-year US Treasuries yield fell 5 basis points to 0.766pc, though it is still more than 40 basis points above a record low of 0.318pc touched on Monday.

The two-year yield fell 5 basis points to 0.449pc, but stood well above Monday's low of 0.251pc.

In commodities, oil prices were hit by an intensifying price war between Saudi Arabia and Russia, on top of fears of sharp slowdown in the global economy.

Saudi Arabia promised to raise oil output to a record high in its standoff with Russia.

The United Arab Emirates followed Saudi Arabia in promising to raise oil output to a record high in April. US West Texas Intermediate (WTI) crude shed 4.1pc to $31.64 per barrel.

Copper, seen as a gauge of global economic health because of its wide industrial use, fell to three-year lows. In the currency market, the dollar slid against the safe-haven yen and the Swiss franc.

The US currency fell 0.8pc to 103.66 yen and lost 0.3pc to 0.9344 franc.

The euro traded at $1.1292, up 0.2pc ahead of the European Central Bank's policy meeting later in the day.

The ECB is all but certain to unveil new stimulus measures, including new, ultra-cheap loans for banks to pass onto small and medium-sized firms.

Markets have priced in a 10 basis point cut to its already record low minus 0.50pc policy rate though many policymakers have said further cuts could be counterproductive because they hurt bank margins to the point of thwarting lending.

Many emerging market currencies also sold off.

MSCI's emerging market currency index dropped 0.7pc to its lowest level since early October, with those of oil-producing countries hit the hardest.