The FTSE 100 yesterday chalked up its biggest one-day fall since the Black Monday crash in 1987, plunging 10.87 per cent as the scale and likely impact of the coronavirus pandemic became clear.
After a sea of dire corporate warnings across the globe, US stocks also suffered their biggest fall since 1987 before the New York Federal Reserve said it would pump $1.5 trillion (£1.19 trillion) into short-term lending markets.
Wall Street trading was halted for the second time in a week yesterday after the S&P 500 fell seven per cent within minutes of the market open.
The action had limited effect on traders, however. The S&P 500 finished down 9.51 per cent, the Dow Jones ended 9.99 per cent lower, and the Nasdaq ended 9.43 per cent down.
European stocks suffered their worst day ever, after US President Donald Trump’s decision to bar arrivals from most European countries sparked alarm across continental markets.
Clumsy comments from European Central Bank president Christine Lagarde further spooked traders, as she implied the central bank wouldn’t act to calm bond markets. She was later forced to clarify her comments and reassure investors.
As trading ended in the City, Prime Minister Boris Johnson said in a statement that coronavirus is “the worst public health crisis for a generation”.
In a sombre speech, he warned “many more families are going to lose loved ones before their time”.
He added that as many as 10,000 Brits could already be infected, as the peak of this disease is several weeks away. In Italy the death toll topped 1,000.
Johnson’s words came after a day of brutal share slumps for firms linked to aviation as traders weighed up Trump’s flight ban, which excludes the UK and Ireland.
British Airways owner IAG closed 15.8 per cent lower, while Norwegian Airlines fell more than 22 per cent. Retailer WH Smith — which has a sizeable airport footprint — plunged 21 per cent as it warned of a £40m hit from the coronavirus outbreak.
Stock markets have now been tumbling for two weeks over fears Covid-19 could badly damage economies, as offices and factories
close, demand slumps and supply chains are disrupted.
On Wall Street, airlines plummeted 19.6 per cent, while interest rate-sensitive bank shares dropped 10.5 per cent.
The CBOE Volatility index , a gauge of investor anxiety, climbed to levels not seen since November 2008, the height of the financial crisis.
The FTSE 100 fell to levels not seen since 2012 as around £160bn was wiped off the index despite the government and Bank of England yesterday unveiling a package of stimulus measures.
Oliver Jones, senior markets economist at Capital Economics, said central bank stimulus is “not going to make a difference” in the near term in the face of “this kind of shock to the economy”.
The New York Stock Exchange was said to be considering shutting its trading floor due to the outbreak, while working from home went from optional to mandatory across Wall Street offices.
JP Morgan, Goldman Sachs and Morgan Stanley each announced similar programs yesterday for working remotely.
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