The FTSE 100 has shed a reported £206bn after suffering its worst week since the 2008 financial crisis as new cases of coronavirus pummelled global stock markets.
London’s blue-chip index closed at 3.18 per cent down for the day to end a dire week for listed companies who have issued warnings on the coronavirus outbreak.
A further loss of 215 points has taken the index down to 6580 points and wiped a further £53bn off its value.
Only the post-Lehman Brothers meltdown in autumn 2008 and the 1987 crash have seen the FTSE 100 stagger to greater falls.
The index suffered a drop of as much as four per cent today before finishing the day down by 260 points.
France’s Cac and Germany’s Dax both experienced a more than four per cent plunge today.
European stock markets ended the day with a provisional 3.8 per cent slump. Meanwhile, US indices continued to suffer for a seventh straight day of losses.
The S&P 500 fell by as much as four per cent on Friday and was 15 per cent lower than its record. The Dow Jones was down by 1.5 per cent just a day after suffering the worst losses in its history.
AJ Bell investment director Russ Mould said the stock market corrections contrast with recent record highs.
“To provide some context all we have done is blow the froth off what had been looking and feeling like a pretty bubbly market,” he told City A.M.
While the virus is understandably a big concern, especially as its economic impact is spreading but still impossible to quantify, the steep share price falls are probably as much a function of prior market exuberance and complacency as they are the current effects of the viral outbreak as they stand today.
First UK death as cruise ship patient expires
The fresh falls came on the same day that Japan confirmed the UK’s first coronavirus death. The country’s health ministry said a Brit infected on the quarantined Diamond Princess cruise ship has now died.
And Wales also confirmed its first coronavirus case along with two new UK infections. After Northern Ireland also diagnosed a coronavirus patient yesterday, the UK total now stands at 19.
Analysts warned there was no end in sight for markets misery as the coronavirus outbreak spread across the world.
Wales, Lithuania, Nigeria and New Zealand all reported their first cases today as the UK’s total number of cases rose to 19.
Meanwhile, traders feared the worst despite the World Health Organisation not yet labelling the coronavirus a global pandemic.
Catastrophic day for FTSE 100 and global stocks
“It is another catastrophic day for investors as global stock markets continue to fall,” AJ Bell investment director Russ Mould said.
“There is no sign of widespread bargain hunting by investors despite the cut-price shares on offer,” he added.
“That 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.”
As of yesterday the FTSE 100 had shed £158bn for the week following collective falls of 8.5 per cent since Monday.
FTSE 100 enters correction territory
That left the FTSE 100 close to its lows of Christmas 2018, and if it continues to plunge it will face pre-Brexit referendum levels, economists warned today.
Spanish and Italian indices have seen similar drops with the pan-European Stoxx 600 down around 2.7 per cent.
Asian markets also continued to suffer heavy losses with Japan’s Nikkei 225 plummeting by more than 3.5 per cent, while the Hong Kong index Hang Seng fell by as much as 2.5 per cent.
Yesterday, the Dow Jones suffered its biggest fall in history as the Wall Street index sank 1,191 points or 4.4 per cent to put US markets on course for their worst week since October 2008 – the financial crisis.
The S&P 500 and Nasdaq indices also suffered losses of more than four per cent. Global stocks had lost £2.9 trillion for the week as of yesterday’s close, according to AJ Bell.
AJ Bell’s Mould said low share valuations for big companies could be an opportunity for investors looking for potential bargains before the FTSE 100 bottoms out.
“There are still worries which could stop investors from piling in when that time comes,” he added. “Valuations in some sectors/markets are very extended, we’re overdue a recession, global debt has gone through the roof, central banks have limited ammo and the economy was looking pretty brittle anyway.”
Markets.com’s chief market analyst Neil Wilson added:
Global stocks have entered correction territory and it’s now that we can start to consider the market is 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; the smart money will be looking at judiciously buying.
The problem is that once fear takes over, a 10 per cent correction can become a 20 per cent bear market in no time, so if you are going in you need to be prepared to take a hit instantly.
Easyjet and BA stocks plunge on FTSE 100
Airline stocks suffered the most. British Airways owner IAG’s share price staggered as it warned it could not calculate how badly 2020 profit will suffer from the coronavirus outbreak.
And Easyjet shares fell as the airline cancelled flights to Italy, where cases spiked to more than 400 this week, prompting the country to put several towns into lockdown.
Mould said FTSE 100-listed Easyjet and BA owner IAG have confirmed what markets have feared – that the coronavirus panic has hit people’s appetite to take holidays.
“Shares in airline companies have plummeted in the past week as investors looked for obvious sectors that would be negatively impacted by the current panic,” he said.
“Sharp share price declines have subsequently made this one of the sectors in the sights of contrarians,” Mould added, saying Easyjet was one of the most bought stocks on AJ Bell’s platform this week.
UK faces Covid-19 economic downgrade
This morning, Bank of England governor Mark Carney warned that the UK should brace for an economic downgrade as a result of the coronavirus.
Carney told Sky News that disruption to supply chains could force a downgrade with the global impact of the virus spilling into Britain.
“We’re not picking that up yet at all in the European and UK economic indicators, but if the world is slower than the UK, a very open economy, will have an impact,” he said.
More countries report first coronavirus cases
It came as the coronavirus spread into Nigeria, Lithuania and New Zealand, which all reported their first coronavirus cases today. Wales then reported a new case after Northern Ireland reported one last night to bring the UK’s total to 19 cases.
Spreadex analyst Connor Campbell blamed yesterday’s US stocks rout for the FTSE 100’s plunge on Friday.
“Thursday’s freefalling momentum carried over into Friday morning, leading to a gory start for Europe and pushing the market towards its worst week since the financial crisis,” he said.
“As the coronavirus inches closer to pandemic levels – Nigeria, Lithuania and New Zealand became the latest nations to report their first cases – and IAG and easyJet only confirming what investors had already suspected with their morning statements, there was nothing to staunch the loss of blood.”
Wilson added: “What’s been startling is the speed of the decline. Only a week ago we were at record highs – it’s taken the S&P 500 just six sessions to go from all-time high to correction. Yesterday’s 4.4 per cent decline was the worst in nine years.”