FTSE coronavirus impact

Written by Citywire

February, 2020

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FTSE dives 3% as rout on coronavirus fears deepens

The FTSE 100 has tumbled, sliding deeper into correction territory as fears over the spread of the coronavirus continued to grip investors.

The UK blue-chip index fell 203 points, or 3%, to 6,592 after a heavy sell-off in US markets overnight, with the S&P 500 posting its biggest daily fall since August 2011, down 4.4%. The FTSE 100 is now on course for a near-11% fall this week.

Asian markets were also down heavily, with Japan’s Nikkei 225 tumbling 3.7% as it too entered correction territory, while Hong Kong’s Hang Seng fell 2.4%. In Europe, Germany’s DAX 30 fell 3.2% and France’s CAC 40 was down 3.2%.

‘The bearish stampede continues as traders are terrified the health crisis will cause a halt in economic activity across Europe,’ said David Madden, market analyst at CMC Markets UK.

‘This has been one of the worst weeks on the markets in a very long time, leaving investors’ portfolios battered and bruised,’ added Russ Mould, investment director at AJ Bell.

‘There is no sign of widespread bargain hunting by investors despite the cut-price shares on offer. This might not happen until there is a clearer picture of how far and wide coronavirus has spread and how different countries are trying to contain it.’

Neil Wilson, analyst at Markets.com, said stock markets now appeared to be ‘entering the period of peak fear’.

‘The market is crowding rapidly to price in the worst-case scenario, and I think now we can say the blood is running in the streets,’ he said.

Investors continued to flee to perceived safe havens. The yield on US 10-year government bonds fell further into record territory, dropping to 1.19%. But the gold price failed to ignite, as the price of the precious metal, though still around a seven-year high, was down from Monday’s spike, trading at $1,630.

On the FTSE 100, the sell-off was broad based, with only two stocks escaping losses. Rolls-Royce (RR) rose 5.9% to 635.8p as the aircraft engine maker reported narrowing losses while NMC Health (NMC) was unmoved as a result of its suspension yesterday.

The UK’s largest investment trust, Scottish Mortgage (SMT), was the heaviest faller, down 6.7% at 545.5p, as shares in closed-end funds were hit hard.

Travel stocks once again tumbled to the bottom of the index. International Airlines Group (IAG) was down 6.1% at 483.9p as the British Airways owner said the spread of the coronavirus would hit earnings this year while TUI (TUI) fell 6.3% to 614.6p. 

EasyJet (EZJ) pared losses to trade flat on the day at £11, up from a low of £10.50 at the open, as the budget airline announced it would cancel flights and cut costs across its business amid the coronavirus outbreak.

‘Both International Airlines Group and EasyJet have confirmed what the market has been fearing for days, namely that all the negative headlines around the coronavirus have led to a weakening of demand to fly,’ said Mould.

‘EasyJet’s problems are currently focused on Italy, however International Airlines Group is reporting weakness on a much bigger scale.’

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