Coronavirus crisis wipes £59bn off FTSE 100
Coronavirus wiped £59bn off the FTSE 100 today to cap off another week of stock market turmoil.
The blue-chip stock index sank by 3.6 per cent, or 242.88 points, to finish the week on 6,462.55 points – its lowest since July 2016.
Meanwhile, the FTSE 250 was down 2.98 per cent, or 576.62 points to 18,746.51
Elsewhere in Europe, Germany’s Dax index fell by 3.37 per cent and the French Cac lost 4.14 per cent as markets parred any gains from the week.
The pan-European Stoxx 600 shed 3.67 per cent for the day.
It comes after reports emerged of a second UK coronavirus death today as coronavirus cases in Britain reached 163. Globally Covid-19 infections passed 100,000.
Last week the FTSE 100 saw more than £200bn wiped off its value.
The losses have sparked fears of a wide economic downturn. But law firm Avonhurst’s political analyst, Tina Fordham, said there was a higher chance of government intervention than in the 2008 financial crisis.
“Beyond the human cost, the coronavirus is the most significant black swan [event] for politics, markets and the economy since the global financial crisis,” Tina Fordham, partner at law firm Avonhurst, said.
“The competence of leaders is about to be tested, with much higher stakes—public health and safety—than during the debt crisis.
“One source of comfort to investors may be that the risk to public health probably means a recession triggered by a pandemic would see more political support for fiscal stimulus than the 2008 crisis. Though it also poses a demand shock that could hurt the economy if policy makers are seen to overreact.”
Read more: Coronavirus: Asian stocks follow US into the red as infections near 100,000
The S&P 500 and Dow Jones were both set to follow suit, down 3.1 per cent and 2.6 per cent respectively so far today, following on from heavy losses on Thursday of more than three per cent.
“Stocks are plunging as fear becomes the primary emotion in capital markets,” said Principal Global Investors strategist Seema Shah.
“Strong global economic data, although reassuring, is quickly out of date against this threat,” she added.
Hong Kong’s Hang Seng and Japan’s Nikkei 225 both lost over two per cent on Friday, while the Shanghai Composite fell 1.21 per cent.
European equities got off to a volatile start this morning and slipped further as the day went on, with Germany’s Dax and France’s CAC 40 shedding 3.42 and 3.77 per cent respectively.
“With no signs of the outbreak slowing down… 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,” said Spreadex analyst Connor Campbell.
London equities shaken as outbreak spreads
In London, Cruise operator Carnival slipped as much as 5.25 per cent to its lowest level since 2012 after one of its ships was barred from mooring in San Francisco after an outbreak of Covid-19 onboard.
Over 2,000 people are on board the Grand Princess ocean liner, including 140 British nationals.
FTSE 100 insurer Aviva fell almost three per cent after announcing it would exit the Indonesian market by selling its stake in joint venture PT Astra Aviva Life to the operation’s other partner.
Shares in shopping centre-owner Hammerson plunged over five per cent to their lowest level since the 1990s following a warning from Goldman Sachs analysts that the retail landlord could struggle to find a buyer.
Goldman analysts downgraded Hammerson, which has written £800m off the value of its portfolio properties this year, from a “buy” to a “neutral” rating.
The total number of infections in Britain now stands at 116. One older woman with underlying health problems yesterday became the first person in the country to die after contracting coronavirus.
Read more: Firms send staff home as coronavirus arrives in Canary Wharf
“It was a sour end to the week for markets as investors’ hopes over a full blown equity recovery were dashed,” said AJ Bell investment director Russ Mould.
“Non-stop news headlines about the spread of coronavirus has caused investors to be very concerned about a global recession. This tension is likely to remain front and centre until we get some evidence that the virus can be contained,” he added.
Government bond yields slide to record lows
The ongoing outbreak has also pushed the price of government bonds to historic highs and yields (which move inversely to prices) to record lows.
Fears over the epidemic have sent the price of equities tumbling as investors flock to the perceived safe haven of government bonds.
Yields on 10-year UK government bonds slid to a record low of 0.23 per cent this morning, while yields on the same maturity of German government debt, already in negative territory, also fell to a new record.
Yields on both 10-year and 30-year US government bonds also tumbled to fresh record lows, with the latter on course for its biggest daily drop since 2011.
It’s going to get ‘substantially worse’, warns star manager
The manager of a peer-beating bond fund thinks markets aren’t prepared for how severe the global fallout from the coronavirus outbreak will be.
Allianz’ Global Investors’ Mike Riddell, who manages $4.6bn (£3.6bn) for the company and whose Strategic Bond Fund outperformed 98 per cent of its peers last month, told Bloomberg that the virus-induced turmoil is only just getting started.
Riddell said he thinks that bond yields still have further to fall, despite yields on UK and US government bonds sliding to fresh record lows.
“The speed of the market repricing has obviously been dramatic, however markets have only gone from pricing in no risk of anything to a moderate risk,” Riddell said.
“Where we think markets can still move is in volatility.”
Riddell added that even if the health impact of Covid-19 was relatively muted, the same may not be the case for its market and economic impact.
“It is the quarantining and essentially the shutting down of large parts of the global economy which is causing substantial economic and financial market damage,” Riddell said. “My base case is things get substantially worse from now.”
Sequoia Capital warns of coronavirus ‘black swan’
One of the world’s top venture capital firms has urged the founders and heads of its portfolio companies to brace for economic shocks caused by the coronavirus epidemic.
In a note also published online, Sequoia Capital described Covid-19 as “the black swan of 2020”.
The note urged companies to consider cutting expenses, review their staff numbers, and prepare for changes in the fundraising and sales environment.
“With lives at risk, we hope that conditions improve as quickly as possible,” said the note, which was signed off by “Team Sequoia”.
“In the interim, we should brace ourselves for turbulence and have a prepared mindset for the scenarios that may play out.”
The virus has already had a dramatic impact on the US tech industry, with major firms including Google, Apple and Facebook cancelling travel plans and telling some employees to work from home.
An outbreak in Seattle, a major US tech hub, has killed 10, while cases in California have risen to 60. The state has declared a state of emergency, joining Washington state and Florida.