Dow falls more than 4% amid coronavirus stock rout

01 Mars, 2020, 01:26 | Auteur: Auguste Feret
  • London stocks continue declining amid coronavirus

Coronavirus panic sent world share markets skidding again on Friday, compounding their worst crash since the 2008 global financial crisis and pushing the week's wipeout in value terms to $5 trillion (Rs 363 lakh crore).

On Wall Street, the Dow Jones Industrial Average lost 1,191 points on February 27, the largest ever daily points drop in its history.

London shares were hit by the coronavirus spreading as the blue-chip FTSE 100 fell 1.9 percent and the mid-cap index lost 1.3 percent on Thursday.

Investors are anxious the coronavirus impact could spark a global recession.

The global rout knocked mainland Chinese shares, which have been relatively well supported this month, as new coronavirus cases in the country fell and Beijing doled out measures to shore up economic growth.

Meanwhile, Bank of England governor Mark Carney warned on Friday that the United Kingdom should be prepared for coronavirus to dent the country's economy.

Dozens of firms have warned of disruptions to their supply chains and a decline in consumer demand.

Ipek Ozkardeskaya, of Swissquote bank, said: "The slide we are seeing right now is not the correction of the recent stock rally, but the market's understanding that the coronavirus outbreak would translate into significantly lower earnings and an anaemic global growth".

Shares in airlines have been especially hard-hit as travel bans are imposed and companies limit staff travel.

Sectors most exposed to China for revenue, including autos and miners, lost between 2% and 4.7%, as investors grew increasingly anxious about the impact of the outbreak on global supply chains. "Things will become further complicated from next week onwards because each piece of economic data that comes out is going to more clearly reflect the economic situation globally", said Connor Campbell, analyst at Spreadex in London.

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Oil prices languished at their lowest in more than a year having plunged 12 percent this week - its worst since 2016 - while all the major industrial metals have dropped between 3 percent and 6 percent.

European shares are expected to dive more than 3 per cent, with Euro Stoxx 50 futures down 3.18 per cent, German DAX futures shedding 3.46 per cent and FTSE futures losing 3.29 per cent.

In Asia, MSCI's regional index excluding Japan shed 2.6 per cent. Japan's Nikkei slumped 3.7 per cent on rising fears the July-August Tokyo Olympics in may be called off due to the coronavirus. "But at the moment, no one can tell how long this will last and how severe it will get".

Mayank Mishra, a strategist at Standard Chartered Bank, said: "Previously the market had taken some comfort in the falling infection rates in China as a result of containment measures put in place earlier".

"But the spread of the coronavirus infection exterior China with collections arising in South Korea, Italy and also Japan has actually enhanced worries dramatically".

The biggest risers on the FTSE 100 were Rolls Royce, up 19.4p at 620p; Kingfisher, up 3.3p at 189.35p; Carnival, up 38p at 2,435p; BT Group, up 2.12p at 141.62p; and Johnson Matthey, up 30p at 2,511p.

However, Ms Laud noted that the falls followed a very strong period for shares. "These are highly uncertain times, no one really knows the answer and the markets are really panicking". Fed funds futures 0#FF: are now fully pricing in a rate cut next month, with the question only being how large it will be.

"I think there will be a huge focus on governments to step up fiscal stimulus under the assumption there is not a lot more that central banks can do to stimulate the economy".

Apple and Microsoft, two of the world's largest businesses, are among those who have said their sales this quarter will be affected.

US crude futures CLc1 fell 2.7% to $45.85 per barrel, having lost 14.1% so far on the week, which would be the deepest fall in almost nine years.

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