China’s policy easing step came on the heels of the US Federal Reserve’s move to provide up to US$5 trillion in liquidity into the US financial system over the next month to ensure that short-term interest rates did not rise.

The US Federal Reserve is also expected to slash its main interest rate to near zero next week on top of its emergency half-point cut last week.

Other central banks joined the action. The European Central Bank said on Thursday it would increase its purchases of bonds to add liquidity to the European financial system, but stopped short of cutting a key interest rate that was already negative.

That move came a day after the Bank of England cut its base rate by half a point. On Friday, the Norwegian central bank cut its interest rates and the Bank of Japan offered to buy more bonds to shore up its economy.

Shanghai shed 1.2 per cent on Friday, but its losses were below those of many other Asian markets owing to confidence that Beijing was bringing the epidemic under control and would take steps to prevent the world’s second biggest economy from collapsing.

The PBOC easing move, which came after the Asia markets closed, helped US and European stocks to rebound. The S&P 500 rose more than 6 per cent on Friday’s opening, with London’s FTSE 100 up almost 7 per cent at midday.

“The coronavirus is a big shock for global markets and will lead to an economic growth slowdown … but the global economy’s future is not completely dark,” said Wei Jianguo, a vice-chairman at China Centre for International Economic Exchanges, a think-tank.

China’s economy, which has accounted for most of global growth over the last decade, will recover as supply chains gradually return to normal, he predicted.

With events unfolding at a dizzying pace, economists were finding it hard to gauge the full impact of outbreak, though many now predict a global economic recession this year.

To make matters worse, there is little prospect that the world’s major powers will agree on a coordinated approach to curb the pandemic and to manage the fallout.

US President Donald Trump’s decision to ban the entry of Europeans for 30 days was made unilaterally, according to European diplomats.

US Congressional leaders and the White House were racing to reach compromise legislation to provide help to people affected by the virus and blunt the impact on the economy, with Congress expected to vote on the deal next week.

The head of the group of European finance ministers said Thursday that he expected the European Union to agree to a “very large” package of measures to fight the impact of the epidemic, larger than the €27 billion (US$30 billion) demanded by European Central Bank President Christine Lagarde earlier in the day.

Lagarde warned that “complacency” on the part of European governments could hamper their response to the outbreak.

In Europe, several countries stepped up drastic measures to contain the spread of the virus, including closing borders and airports and shutting schools, as the death toll continued to rise across the continent.

More than 27,000 infections have been recorded in Europe, with Italy accounting for the lion’s share, with more than 15,100 cases and over 1,000 deaths.

Belgium’s interim government declared a state of national crisis, shutting down schools, bars, restaurants and public events until early April.

Similar school closures were also adopted in the German states of Bavaria and Saarland, as well as in Austria, while France announced a ban on any events with more than 100 participants.

Spanish Prime Minister Pedro Sanchez also decreed a state of alarm, which paves the way for a state of emergency if the situation worsens.

This means the government can now limit the movement of people and vehicles and take over industries and factories, and ration daily necessities.

The virus also spread to more prominent government officials and their families on Friday.

Sophie Grégoire Trudeau, the wife of Canadian Prime Minister Justin Trudeau, tested positive for the coronavirus, the prime minister’s office said.

Peter Dutton, Australia’s minister for home affairs, tweeted on Friday he had also tested positive for the virus. The hard-line conservative met last week with US President Donald Trump’s daughter Ivanka.

Brazilian President Jair Bolsonaro has also been tested for the coronavirus after his press secretary, Fabio Wajngarten, tested positive.

Wajngarten attended a dinner last Saturday with Trump in Florida and posted a picture of himself with the president and Vice-President Mike Pence.