Monday 9 March 2020 4:59 pm

Coronavirus: FTSE 100 loses £144bn after worst day since 2008

The FTSE 100 has had £144bn wiped off its value today as it closed below 6,000 points and suffered its biggest intraday fall since 2008.

The coronavirus outbreak and plunging oil prices dragged the index down as much as 8.7 per cent to just 5,899 points as it opened following a weekend of coronavirus turmoil.

London’s blue-chip index rebounded slightly during the day and closed 7.25 per cent lower at 5,994 points.

Today’s losses bring total losses for the year-to-date to £456bn.

UK coronavirus cases climbed to 319 today as health secretary Matt Hancock confirmed the fourth death related to the illness.

Read more: Oil prices and Asian stocks collapse under coronavirus fears

Investors flee FTSE 100 amid coronavirus turmoil

The FTSE 100 collapse came after the index lost £59bn on Friday following a £200bn loss the previous week. Today’s sell-off was fuelled by coronavirus-induced panic in Europe over the weekend.

Italy placed 16m citizens under lockdown in a desperate attempt to contain the coronavirus threat and the UK counted its third death as infections rose to 273.

There have since been over 110,000 infections since coronavirus emerged in China at the start of 2020. And the global death toll from the Covid-19 strain is heading towards 4,000. 

With vast swathes of China still in lockdown and containment efforts ramping up in Europe, investors are concerned that the hit to supply chains and demand could bring about a global recession.

‘Unhinged’ oil prices to blame for FTSE 100 woes

But the trigger for today’s sell-off was Saudi Arabia’s move to ramp up oil production. Saudi Arabia launched the price war after Russia resisted a supply cut to stabilise oil prices.

UBS analyst Bhanu Baweja said the oil price had become “unhinged”, plunging as much as 30 per cent on Sunday evening. Brent crude is on track for its biggest one-day fall since the Gulf war of 1991 as a result.

Deutsche Bank analyst Jim Reid added: “It takes a lot to stun you in financial markets.”

Yet he said the oil price move “has done that and deserves its own place in the history books”.

“The plunge in oil has led to complete capitulation in other markets this morning,” he added.

Investors fleeing stocks rushed to the safety of government bonds. That sent the yield on the two-year UK Gilt into minus territory for the first time ever. 

The yield on the 10-year US Treasury also hit a record low, below 0.5 per cent. Yields fall as prices rise.

European stocks fall into bear market territory

European stocks sank along with the FTSE 100. The pan-European Stoxx 600 had fallen 7.2 per cent by 3.30pm. That put it firmly in bear market territory – a fall of 20 per cent since recent highs.

France’s Cac and Germany’s Dax had both slumped 7.6 per cent by mid-afternoon.

The European sentiment indicator from data firm Sentix crashed deep into negative territory this morning. It demonstrated the fear Eurozone investors have of the virus outbreak.

“Never before has such a strong synchronised collapse of the global economy been measurable in our data,” said Manfred Huebner, managing director of Sentix. Coronavirus “is plunging the global economy into recession,” he said.

Traders are increasingly betting the European Central Bank (ECB) will cut interest rates on Thursday. That would follow the US Federal Reserve’s emergency rate cut last week

Deniela Ordonez, lead Eurozone economist at consultancy Oxford Economics, said: “Action by policy-makers to support the economy is urgent.” 

Read more: Saudi Arabia to up oil production after Opec deal falls through

Asian stocks also slumped overnight following Saudi Arabia’s move. Japan’s Nikkei tumbled five per cent. Hong Kong’s Hang Seng index slid 3.8 per cent and China’s Shanghai composite fell three per cent.

‘£130bn’ wiped off FTSE 100 as oil stocks fall

The FTSE 100’s morning plunge was equivalent to £130bn being wiped off the index, according to Sky News. That saw the FTSE fall to its lowest level since the Brexit referendum in 2016.

Artur Baluszynski, head of research at Henderson Rowe, said the move by Saudi Arabia meant “oil and mining heavy indices such as FTSE 100, already weakened by the coronavirus, are massively exposed”.

The FTSE 100’s energy giants dragged the index down. Shell fell as much as 22 per cent before regaining some ground to be down 12.9 per cent at 1,393p.   

BP fell as much as 25 per cent to hit its lowest price in 24 years. It was last 17.4 per cent lower at 327p.

Among the other big FTSE fallers were energy and miners such as BHP, Centrica, Evraz and Anglo American. No stocks had risen by mid-morning.

US stocks halt trading amid sell-off

US stocks plunged as they opened today, forced seven per cent down amid a huge sell-off.

The mass sell-off was large enough to trigger an automatic 15-minute pause in trading. The measure, put in place after the financial crisis, is designed to give US stocks some breathing space.

Wall Street stocks managed to climb slightly after the pause. But the S&P 500, Dow Jones and Nasdaq remained 5.7 per cent, six per cent and 5.3 per cent down respectively.

The US dollar index fell one per cent lower as traders price in another interest rate cut from the Fed. Lower interest rates reduce the returns on dollar-denominated assets.

Read more: Coronavirus claims third victim in the UK

Sal Gautieri, senior economist at BMO Capital Markets, said: “The Fed will no doubt slash rates again … regardless of what inflation does.”

He said this made inflation data coming out this week “largely irrelevant”.

Investors are now betting on a deep interest rate cut from the Fed.

That would come after a 50 basis point cut last month failed to lift Wall Street.

FTSE 100 in ‘knife-catching territory’

“Market developments this morning put us very much in knife-catching territory,” Commerzbank senior economist Peter Dixon said.

“The likes of Warren Buffett will tell you that the time to buy is when others are fearful. [But] it does not feel like that today. There may be better entry points into the market, even if there is a temporary rebound from here.

“The downside potential for the UK market appears quite significant,” he added. He warned of “macroeconomic consequences” if the FTSE 100 returns to financial crisis territory.

Central bank measures lack bite

Meanwhile, Edward Moya, of online forex trader Oanda, warned there is little central banks can do to slow markets’ freefall.

“Even though expectations are high the Fed will take rates to the zero bound, the retail investor will likely want to wait this one out,” he added.

“It seems the collapse with oil prices have added a log to the deflationary fire the Fed will try to extinguish. Virus fears, deflationary risks, and growing stress in the credit markets, means markets will see the Fed launch a new quantitative easing programme very soon.     

“Eventually investors will start scaling back into stocks, but it seems the technical selling can remain ugly for a couple more days. Markets will move beyond the coronavirus [and] adjust to lower oil prices. Expect a wrath of global stimulus likely to remain in place over the next year.”