Bloodbath on the markets deepens as the FTSE 100 falls nearly 10%

The bloodbath on the stock markets is mounting this afternoon, with Britain’s blue-chip FTSE 100 index down nearly 10 per cent. 

At present, the FTSE 100 is down 9.52 per cent or 559.55 points to 5,316.97, which is lower than it reached in the aftermath of the June 2016 EU referendum vote and the lowest seen since 2012. 

Some City insiders think the FTSE 100 could be on course for its bleakest day of losses since Black Monday in 1987, when the index slumped by 23 per cent over a two day period.    

Global markets plunged ever deeper into the red after the European Central Bank unveiled a package of measures aimed at shielding the eurozone economy from the shocks of the coronavirus outbreak.  

The ECB failed to cut interest rates and its string of fiscal measures aimed at loosening monetary policy appear to have done little to allay the fears of investors.  

Last week the US central bank cut interest rates, while in Britain on Wednesday Mark Carney’s Bank of England policymakers made an emergency interest rate cut from 0.75 per cent to 0.25 per cent ahead of the £30billion Budget. 

Again, the actions of these major central banks appear to have had little positive impact on the mindset of investors. 

Across the pond in the US, trading on Wall Street was halted for the second time in a week after the S&P 500 hit exchanges’ 7 per cent threshold drop earlier. Trading was stopped for 15 minutes to ensure order in the marketplace. 

The Dow Jones is currently down over 7 per cent to 21,790.65, while the S&P index is down 6.47 per cent to 2,564.10 and the Nasdaq composite is down 6.129 per cent to 7,460.02. 

Overnight, Asian markets also saw big falls, with Japan’s benchmark Nikkei 225 index closing 4.4 per cent lower. 

On Wednesday evening the World Health Organisation officially labelled the coronavirus outbreak a ‘pandemic’, prompting US president Donald Trump to suspend travel from Europe to the US for 30 days.

Connor Campbell, a financial analyst at Spreadex, stated that the travel ban has made a global recession more likely while the lack of stimulus measures meant ‘investors fled a market landscape that increasingly looked like a crime scene.’ 

The president of the European Central Bank, Christine Lagrade, has warned that the coronavirus outbreak will spark an economic downturn in Europe similar to the 2008 financial crash unless EU governments provide financial support for their economies. 

Lagarde held a call with EU leaders on Tuesday night to urge them to take action and raise spending in order to counter the economic effects of the virus.

Today, the ECB announced it planned to loosen its monetary policy even further, offering more cheap loans to banks and €120billion worth of bond purchases.  

Economists estimate the scale of the ECB’s quantitative easing programme will rise to €33billion a month for rest of this year. 

Sebastien Clements, a currency analyst at OFX, said: ‘In one of the most volatile weeks for markets across the board in the past decade, the ECB have decided to leave interest rates unchanged and not follow the US and UK central banks in cutting rates to ease coronavirus economic fears.

‘The pound dropped nearly 100 pips against the euro in reaction, however has since retraced slightly as the market repositioned itself. 

‘With such a low rate already, the ECB are running low on monetary easing options to combat the growing issues in the Eurozone. Without much wiggle room in terms of rate cuts; fiscal stimulus and quantitative easing cycles will remain the primary policy option for the Eurozone moving forward.’

Travel companies and airlines bear the brunt 

The stock markets are a sea of red this afternoon, with travel companies, airlines and engineering companies hammered from the fallout of the coronavirus outbreak. 

Shares in the embattled owner of Travelex have plummeted by 65 per cent after the group said the coronavirus outbreak was hampering its ability to access enough cash to keep the foreign currency business running smoothly.

FTSE 250 listed Travelex owner Finablr said travel restrictions designed to limit the spread of Covid-19 had weakened demand for its services and disrupted the transport of cash.

Shares in FTSE 100 listed travel group Tui are down over 20 per cent, while British Airways owner IAG has seen its share price fall 11.56 per cent or 45.90p to 351.00p.

Elsewhere, budget airline Easyjet’s share price is down nearly 11 per cent to 827.00p, while rival Ryanair’s shares are down 5.38 per cent to €10.55. 

Cineworld has now said that in a worst-case scenario, it may be unable to pay its debts. Its chief executive Mooky Greidinger admitted the firm could be forced to postpone capital expenditure and reduce costs. 

Earlier today, high-street retailer WH Smith warned that the coronavirus outbreak looks set to hit its annual revenues to the tune of £130million and profits by up to £40million.

With fewer holidaymakers traipsing through airports, the travel hub-focused retailer said the outbreak had started to have a ‘significant impact’ on its business.

Estate agent Savills said the outbreak had caused a big drop in transactions in China and across Asia

Train and bus firm Go-Ahead Group said the outbreak had affected the number of travellers on some of its services.

Travel, tourism and transport businesses have been some of the worst affected by the coronavirus pandemic and the travel ban between the USA, and most of Europe is only likely to exacerbate problems impacting struggling firms. 

Connor Campbell, a financial analyst at Spreadex, said Trump’s European travel ban had made a global recession more likely while the lack of stimulus measures meant ‘investors fled a market landscape that increasingly looked like a crime scene.’ 

Meanwhile, Richard Hunter, head of markets at Interactive Investor, said: ‘These are unquestionably dark days for investors. 

‘The latest pronouncement from the US has exacerbated the sour mood, with a travel ban from Europe dealing another blow to the beleaguered tourism and travel sector. 

‘At the same time, the lack of any specific positive measures in the update has given markets an additional and unwelcome hit to factor in to share prices.’