Coronavirus: FTSE 100 sheds more than 10% in worst day since 1987 crash
A ban on flights to the US from most of Europe tips investor sentiment into renewed panic mode across the world.
Friday 13 March 2020 08:33, UK
The FTSE 100 has had its worst day of trading in more than three decades, falling by more than 10%.
The 10.9% drop marked the index's worst performance since the financial crash of October 1987.
It came as investors reacted to a string of developments including the spread of COVID-19 being officially declared a pandemic and a 30-day ban on flights to the US from most of Europe.
Market analysts said the latest declines marked a new front in the rush for safe havens of recent weeks, as central bank and government action to help mitigate disruption to date was largely taken with a pinch of salt.
The Dow Jones Industrial Average, which entered so-called bear market territory on Wednesday night, followed Asia and Europe sharply lower on Thursday while trading on the S&P 500 was temporarily halted for the second time this week after losses hit the 7% "circuit breaker" designed to prevent excessive volatility.
By the close of Thursday trading, the Dow was down almost 10%, the Nasdaq was down 9.4% and the S&P 500 had fallen by 9.5%.
Sky's business presenter Ian King said: "Donald Trump himself has absolutely contributed to this - the fall in US markets and in Europe this morning is partly because of his travel ban. That has really, really upset investors.
"There is commentary that the US hasn't introduced the same sort of policy response we saw in the UK yesterday.
"Bear in mind, Donald Trump always makes a performance of Wall Street and the US stock market as one of his key indicators. He's always very quick to take the credit when US markets rise.
"The US markets are now lower than when Donald Trump became president - all those gains in his entire term of office have been wiped out."
Airline and travel stocks on the FTSE 100 in London built on earlier losses as the index hit levels not seen since June 2012, during the eurozone debt crisis, in morning deals.
Losses mounted after the European Central Bank (ECB) announced its long-awaited measures to support the eurozone economy.
Germany's DAX and the CAC in Paris hit intraday lows of more than 10% on confirmation interest rates had been left at rock bottom, record lows.
However, the Bank's quantitative easing programme of bond-buying was expanded - by €120bn until the year's end.
Fresh loan facilities for banks to access and refinancing facilities on favourable rate terms were among the measures.
Commentators said the market reaction reflected fears they lacked the scale investors had hoped for while ECB president, Christine Lagarde, hinted euro area governments should be the first responders.
The FTSE had lost 1.4% on Wednesday, despite the double-barrelled stimulus announced by the UK government and Bank of England to support the NHS and wider economy through, possibly, months of disruption ahead.
Jasper Lawler, head of research at London Capital Group, said of the US market mood: "The biggest source of disappointment on Wall Street was the lack of specific ways to support people and SMEs of the sort that were announced in the UK budget.
"Paid sick leave, free testing and a solution for uninsured Americans were all missing."
Congress was expected to give an update on its negotiations with the White House later on Thursday.
Oil prices sank by more than 8% over fears of a glut in supply from a price war despite weak demand.
The pound was also under significant pressure, falling more than 1% against both the euro and the dollar.
A growing number of UK companies, particularly those exposed to the travel sector, have declared themselves unable to forecast full-year revenues and profits as the outbreak evolves.
Among the latest to update the market, WH Smith, said it was expecting a revenue hit of up to £130m because of its exposure to airport shopping.
Intu Properties - behind Manchester's Trafford Centre and Lakeside in Essex - warned of "material uncertainty" over its ability to even continue as a going concern after market conditions forced it to abandon capital-raising plans.
The parent firm of foreign exchange service Travelex and Cineworld also issued trading alerts as a result of the crisis - the latter hit by delays to looming blockbuster productions including the latest James Bond movie.
The 330-year old Lloyd's of London insurance market said it was to close its underwriting floors for the first time ever on Friday for a test of its emergency protocols.
Meanwhile, Chancellor Rishi Sunak, Governor of the Bank of England Mark Carney, Governor-designate Andrew Bailey and Economic Secretary to the Treasury John Glen met banking representatives to talk about support for small to medium-sized businesses affected by coronavirus.
Mr Sunak explained the measures he had announced in the budget, including the coronavirus business interruption loan scheme, which provides lenders with a guarantee of 80% on each loan, extending statutory sick pay, business rates relief, and small business grant funding.