£300bn coronavirus CRASH
MORE than £300bn has been wiped off the value of Britain’s leading companies in just two weeks as the spread of the deadly coronavirus batters financial markets.
On another bleak day for investors, the FTSE 100 index fell 3.6pc or 242.88 points to 6462.55, its lowest level since the aftermath of the Brexit vote in 2016.
The latest sell-off took losses since the start of last week to 12.7pc as analysts warned of ‘near unshakeable panic’ on global trading floors.
In that time, the FTSE 250 has fallen 13.9pc, and Britain’s stock market companies have seen their value fall by £300.2bn in ten days of trading.
The rout has been echoed on stock markets around the world with airlines, tour operators, cruise firms and hotel chains among the worst hit.
David Buik, a consultant to Aquis Exchange, said: ‘The stench of fear is hanging over the markets. Markets cope well with good news, even better with bad news, but they just cannot deal with uncertainty.
‘We have had that caustic experience in spades for the past two weeks and it has cost savers with pensions and other investors dear. Sadly, the sell-off may not be finished until there is evidence that coronavirus is on the retreat or is under control.’
Central banks and governments have pledged support amid fears the epidemic will tip countries around the world into recession.
Interest rates have been cut in the United States, Canada, Australia and Malaysia in a bid to boost the economy.
The Bank of England is expected to follow suit while Chancellor Rishi Sunak will use next week’s Budget to outline the Government’s response to the outbreak. In the US, Donald Trump yesterday signed off a £6.4bn package aimed at stopping the virus spreading.
But the interventions have done little to calm the markets amid fears they are a sign of panic by the authorities.
Government bond prices hit new highs yesterday as nervous investors ditched equities and piled their cash into seemingly safer assets.
The rise in bond prices has pushed yields to record lows. The yield on 10-year government debt in the US fell as low as 0.66pc having stood at close to 2pc at the start of the year. The equivalent gilt yield in the UK has fallen to close to 0.2pc.
And in Germany, the 10-year bund yield fell as low as minus 0.746pc, meaning investors are paying the government in Berlin to lend it money.
Michael Hewson, chief market analyst at CMC Markets UK, said: ‘It’s been another dreadful day. The coronavirus has effected a stampede for the exits in the fashion of someone shouting fire in a crowded theatre, as havens surge and yields plunge.
‘This week’s market gyrations have been something to behold, and signal an investor community that is genuinely fearful of the potential economic hit this virus might have.’ The price of gold – another haven in times of crisis – has risen 5pc this week and 10pc this year.
Connor Campbell, financial analyst at Spreadex, said: ‘With no signs of the outbreak slowing, investors remain gripped with a near unshakeable panic, the week’s various central bank rate cuts only serving to reinforce the seriousness of the situation.’
The prospect of a global downturn or even recession has triggered fears for the future of highly indebted companies.
Alan Custis, head of UK equities at Lazard Asset Management, said: ‘Investors are now treating companies with leverage with a lot of caution. There has been a morphing of this crisis from earnings downgrades due to Covid-19 impacts to the potential for it to be a credit crisis.’