Friday 13 March 2020 4:57 pm

FTSE 100 climb cools as WHO declares Europe new centre of coronavirus pandemic

The FTSE 100 made a slight recovery following its worst day of trading since 1987 despite the World Health Organisation declaring the Europe as the new centre of the coronavirus pandemic.

London’s blue-chip index rose by 2.46 per cent, or 128.63 points, despite having been up almost six per cent in early trading, to finish the week on 5,366.11 points.

However, the FTSE 250 suffered further losses, falling by another 0.99 per cent on Friday, or -155.42 points, to end the week on 15,562.00.

Other European stocks also parred gains as investors sold off before the market’s close, with fears of a repeat of last weekend where the market opened drastically down on Monday morning.

Read more: Corona Crash: Global markets suffer worst day since 1987 as virus spreads

Germany’s Dax was up just 0.77 per cent and France’s Cac grew by 1.83 per cent.

The pan-European Stoxx 600 grew by 1.1 per cent.

Both suffered heavy losses yesterday as Trump’s extreme measure to ban travel from 26 Europe countries except the UK and Ireland spooked investors.

Travel stocks collapsed and investors quit equities in their droves to flee for safe havens.

Wall Street also suffered a brutal day of trading yesterday but has seen a surge today, although the markets are still open.

The Dow Jones had gained 2.96 per cent, or 628.48 points, to reach 21,829.10 points at the time of the FTSE closing.

While the Nasdaq and S&P 500 had both risen 3.05 per cent.

It comes after WHO director-general Dr Tedros Adhanom Ghebreyesus called Europe the pandemic’s epicentre.

Tedros said the worldwide 5,000 death toll was a “tragic milestone” as the number of fatalities rose.

The outbreak began in China, where more than 3,000 deaths have occurred, and there have now been more than 1,000 in Italy.

The number of deaths rose in the Lombardy region rose to 890 today, from 744.

Read more: US airlines stocks in tailspin as coronavirus travel ban kicks in

World stimulus to tackle coronavirus boosts FTSE 100

Fiona Cincotta, chief analyst at City Index, said stock markets owed today’s rise to a raft of stimulus packages pledged by the world’s central banks.

The US Federal Reserve has vowed to inject up to $1.5 trillion to shore up its financial system. And Australia unveiled an $11bn cash injection after its stock market plunged 7.4 per cent.

The Bank of Japan also revealed more generous stimulus measures.

Read more: Bank of Japan strengthens stimulus as coronavirus threatens to cause recession

“The turnaround comes as central banks from US to Australia pump liquidity in the financial markets and as investors become hopeful that US Democrats and Republicans could pass a stimulus package on Friday,” Cincotta said. “Washington may be late to the party, but they are still more than welcome.

“So far, US government bureaucracy has not kept up with the nature of the coronavirus outbreak and market needs and expectations. The Fed did its best last night with a three-day $1.5 trillion liquidity injection into the markets.”

She said investors are hoping for another rate cut and even quantative easing measures next week.

“Stimulus from the Australian authorities and the US Federal Reserve’s cash injection are further signs that central banks are ready to do everything they can to restore calm,” AJ Bell’s Russ Mould said.

“While regulators are also intervening with the UK’s financial regulator banning investors from shorting certain European stocks.”

Italy and Spain ban short-selling

Read more: Italy and Spain ban short selling after record sell-off

Meanwhile, Italy and Spain banned short-selling of 85 stocks in a bid to prop up their indexes. Europe-s Stoxx 600 index rose 1.2 per cent as of 9am UK time.

FTSE 100’s worst drop in 33 years

Yesterday the FTSE 100 also started trading with a rebound. But then stocks sank by almost 11 per cent in the worst day of global turmoil yet on the coronavirus outbreak.

Donald Trump’s decision to impose a travel ban on 26 European countries wiped billions off global stocks, with airline stocks the worst affected.

The second automatic cutout in trading in a week failed to stall Wall Street stocks’ plunge as the S&P 500, the Dow Jones ansd Nasdaq all closed just shy of 10 per cent down.

Meanwhile, the European Central Bank’s stimulus efforts – which did not include a rate cut – failed to lift European stocks out of freefall. France’s Cac crashed 12.3 per cent and Germany’s Dax tumbled 12.2 per cent in the continent’s worst ever day of trading. The continent-wide Stoxx 600 index plummeted 11.5 per cent.

The crisis led the US Federal Reserve to vow $1.5 trillion into the financial system to combat the coronavirus fallout. That prompted a sharp turnaround in US stocks. But gains were muted as traders questioned whether central bank intervention was sufficient.

Helal Miah, investment research analyst at The Share Centre, said he was shocked at this week’s volatility.

“Yes we had some big moves during the financial crisis and sovereign debt crisis and the odd flash crash, yet they never had the extreme one day moves as we have had this week,” he said.

Market bottom or dead cat bounce?

He said the FTSE 100’s sharp six per cent jump at the open came in response to a quiet overnight spell from governments in response to coronavirus.

“This can be attributed to no new drastic measures being taken by governments around the world in regards to containing the virus outbreak,” he said.. Some investors may ask whether this is the bottom, it could be, but seasoned traders and investors will merely see it as a dead-cat bounce.

Since Trump’s travel ban, no extreme measures have been announced. Prime Minister Boris Johnson steered clear of closing schools like Ireland did yesterday. Nor will the UK ban large public gatherings at this stage. Instead Brits with coronavirus symptoms must self-isolate for seven days.

Scientists warned public fatigue of such measures could set in before the worst of the coronavirus outbreak has come and gone.

The Federal Reserve has announced $1.5 trillion injection into the financial system and Japan has pledged to shore up its economy too.

Miners prop up FTSE 100 as travel stocks fall

By 9am the FTSE 100 had given up some of its gains to stand 108 points, or two per cent, up at 5,345 points.

Miners led the way, with BHP and Anglo American up 6.7 per cent, Rio Tinto up 5.2 per cent and United Utilities up 4.5 per cent. Morrison’s was another big riser, up 4.9 per cent.

Travel stocks weighed on the FTSE 100. Carnival, owner of the coronavirus-infected Diamond Princess cruiser, slumped 10.6 per cent and Tui sank six per cent. Easyjet gave up 3.8 per cent.

AJ Bell investment director Russ Mould said the Friday 13th date has proved unlucky for stocks like Carnival, which dropped further after suspending its Princess cruises for two months yesterday.

“Cruise operator Carnival was one of the few large cap fallers as investors reacted to the UK government advice for over-70s and people with underlying health conditions not to take cruises,” he said.

Can stocks hold onto gains?

“The question is whether markets can hold on to these levels through the day,” Miah added. 

“That may be hard to do as nervous traders and investors will not want to hold positions through the weekend especially after what happened last weekend and we may see some selling action again towards the end of the day.

“For investors wishing to take a punt now; they may be rewarded over the medium to longer term. Those of a more nervous disposition may just want to sit tight until the volatility dies down.”