Firms hit the panic button
As Trump travel ban triggers worst stock market rout since 1987 crash . . .
SOME of Britain’s biggest firms were pushed to the brink yesterday after President Trump’s shock travel ban sparked the biggest stock market rout in more than three decades.
The FTSE100 plunged almost 11pc to 5237.48 on its second worst day of trading ever as a number of countries stepped up their response to the rapid spread of the virus.
More than £160bn was wiped off the Footsie – a record amount – as every single blue-chip company fell in value.
The percentage drop pipped the 10.8pc sell off during the Black Monday crash on October 19, 1987, and is second only to the 12.2pc fall the following day.
As markets across the world were gripped by fear, there are growing concerns that the pandemic will push a slew of vulnerable companies to breaking point.
Yesterday cinema chain Cineworld warned it could go bust if it is forced to close cinemas for up to three months. And shopping centreowner Intu said it could collapse if it cannot find fresh funds to prop up its finances – which will be difficult to raise in the current market – after the value of its properties fell by £2bn last year.
Helal Miah, investment research analyst at The Share Centre, said: ‘It feels like a bit of a panic on the markets at the moment – but as the days go on and you see how things are being shut down, the sell-off seems justified. This could push fragile companies – such as those with weak balance sheets and large debts – over the edge.’
The warnings from Intu and Cineworld came as big firms from all sectors, from retailers to travel companies, sounded the alarm:
● WH Smith said profits were likely to halve to £40m because travel restrictions have led to a drop in shoppers visiting its airport stores;
● Airline Norwegian announced plans to lay off half of its staff and cut 4,000 flights;
● Cruise operator Carnival’s Princess Cruises division will shut down for two months due to the virus after two of its ships became floating Covid-19 hotbeds;
● Bus and rail group Go-Ahead warned it expects fewer passengers to use its services;
● Transport booking app Trainline has seen a hit to recent trading;
● Travelex-owner Finablr said it would be difficult for the company to access cash it needs to keep the business running smoothly.
The dramatic fall in UK shares was mirrored on bourses in Europe, the US and Asia.
Trading on Wall Street had to be suspended shortly after opening when the S&P 500 plunged more than 7pc in a matter of minutes.
Emergency circuit breakers introduced after the Black Monday crash in 1987, kicked in for 15 minutes to prevent further panic selling. As soon as they reopened markets started falling again.
By yesterday evening the Dow Jones was down 10pc, while the S&P 500 was down 9.5pc.
Russ Mould, investment director at AJ Bell, said the negative reaction to the Trump administration’s handling of the crisis, which includes a ban on travellers from the EU, and stringent containment measures created ‘a perfect storm’ for markets.