The FTSE 100 plunged more than three per cent on Monday as a rapid uptick in coronavirus cases outside China rattled investors and devastated European stocks.
London’s blue-chip index fell as much as 3.7 per cent to 7,119 points today, as Italy confirmed a seventh person has died from the coronavirus. The FTSE 250 index dropped as much as 3.39 per cent to 21,042 points.
The last FTSE 100 fall of three per cent or more came in October 2019, when Brexit turmoil wiped tens of billions of pounds off UK stocks.
London-listed airlines Easyjet and British Airways owner IAG recorded some of today’s biggest drops, down 16.19 per cent and 9.15 per cent respectively.
Travel operator Tui group and Wizz Air were both down more than 10 per cent at 2pm.
And British government bond yields today touched their lowest level in more than four months, dropping as much as 10 basis points as a result of the latest spread of the outbreak.
Global markets rattled by coronavirus fears
A large spike in coronavirus cases in Italy has shaken investors on concerns that it could spread deeper into Europe and cause economic disruption.
Jasper Lawler, head of research at London Capital Group said: “Any investors who’ve been thinking they could park their investments in the US or Europe to shield them from coronavirus concerns will have to think twice.”
The rapid developments in the outbreak of the virus outside of China prompted a sell off in the FTSE 100 and other global markets on Monday morning.
Fears that the virus outbreak could become a pandemic are growing as countries around the world confirmed an increase in new cases.
Italy recorded four deaths related to the coronavirus outbreak over the weekend, but today that figure rose to seven. And Italy’s number of confirmed cases jumped from three on Friday to a reported 219 today.
The country placed 11 towns in lock down as it tries to stem the worst outbreak of the coronavirus in Europe to date.
Oman today confirmed its first two coronavirus cases following travel to Iran. Iran, which announced its first two cases last Wednesday, has now confirmed 61 cases and 12 deaths.
Boris Johnson: UK risk remains low
The Prime Minister’s official spokesman stressed that the risk to British citizens remains low.
“We are well prepared for UK cases, we are using tried and tested measures,” he said.
“We continue to work closely with the World Health Organization (WHO) and international partners as the situation develops.
Questioned whether the UK could shut down towns like Italy has if the number of coronavirus cases spikes from the current total of 13, the spokesman added: “I don’t think it’s helpful to speculate. The risk is assessed as low, we are well prepared and continue to take advice from world health experts.”
Coronavirus pandemic risk rises
Peel Hunt analysts Ivor Jones and Douglas Jack said: “With the spread of the disease to another developed country the risk of a pandemic developing has increased, and with that investor fear of a pandemic.
“Evidence of the spread of the disease to Africa is the next likely material fear inflexion point because of the lack of resources to prevent rapid spread.”
Meanwhile, South Korea’s total jumped to 833 as it reported 70 new cases today. And Iran has denied a report of 50 deaths in one city alone, put out by native news agency Ilna.
The global number of coronavirus cases now stands above 79,000, with 2,620 deaths.
Chris Towner, director at Chatham Financial, added: “This latest news has caused markets to start to price in the risk that the coronavirus reaches a point where new infections no longer come from Chinese nationals.”
“It makes the virus far harder to contain and if the spread continues more broadly across the globe then trade and travel are bound to be further impacted.”
WHO: Coronavirus not yet a pandemic
But Margaret Harris, spokeswoman for the WHO, said the body will continue to refrain from classifying the coronavirus as an official pandemic. That is because the WHO says there is not an uncontained global spread of the virus. At the moment the group said there continue to be clear links between European victims and cases originating in Asia.
“We could start describing it as a pandemic, but at the moment we are saying it is clusters and outbreaks in some countries,” she said.
“If it became clear that it is all around the globe and we are seeing systematic community transmission, then we would say this meets the definition of a pandemic.”
European stocks suffer as Covid-19 wreaks havoc
The FTSE 100 was not the only index to fall significantly. French index Cac plunged 4.15 per cent while Germany’s Dax dropped 4.16 per cent.
South Korea’s Kospi index fell 3.4 per cent after the country issued a coronavirus alert due to the sharp uptick in cases of the Covid-19 illness.
North Korea has quarantined 380 foreigners in an attempt to curb the spread of infection. The foreigners are reportedly mostly diplomats in the capital Pyongyang.
“The idea that the coronavirus has been fully contained has been firmly banished, and investors are now on notice to expect more cases and, sadly, more deaths,” Chris Beauchamp, chief market analyst at trading platform IG, said.
“This means the economic forecasts of the impact, such as they are, will need to be revised, with a greater impact now to be expected. It is easy to get carried away, and the headlines do not make for pleasant reading.
“This is turning into a more serious correction than seemed likely two weeks ago, but at the moment It does not seem likely to threaten the longer-term bull market.”
Gold surges as investors look for safety
As the FTSE 100 and other global indexes slipped and oil slid on Monday safe-haven gold jumped 2.6 per cent to $1,686 per ounce.
Naeem Aslam, chief markets analyst at Ava Trade, said that the epidemic has ploughed money into safe havens such as gold.
“Investors believe that central banks will be pushed in the corner due to the global economic meltdown caused by coronavirus this means more stimulus.”
Last week’s rally saw the price of gold cross $1,600 and Aslam predicts the price could touch the $1,700 mark.