FTSE 100 closes down 4%
The FTSE 100 has fallen another 4.01 per cent today, recovering slightly after opening with an 8 per cent drop.
Markets across Europe have fallen today, with the French CAC 40 down 5.75 per cent, the German Dax down 5.31 per cent, the Spanish Ibex 35 down 7.88 per cent and the Italian FTSE MIB down 6.10 per cent.
The US is also going through another down day.
S&P 500 opens with 8% drop, triggering ‘circuit breaker’
The S&P 500 fell by 8 per cent at the start of trading today, triggering a ‘circuit breaker’ that halted trading for 15 minutes - a measure taken to prevent markets from crashing altogether.
This followed the FTSE 100 and other European markets opening with significant falls today.
The decline comes in spite of the Federal Reserve’s emergency move to cut interest rates yesterday to 0-0.25 per cent and launch a $700bn stimulus package via more quantitative easing, all in an effort to shore up confidence in the face of the coronavirus pandemic.
Travel stocks among FTSE 100’s worst performers today
Airlines and other travel companies continue to be hit with heavy selling as coronavirus causes lockdowns and travel restrictions.
At lunchtime today, International Airlines Group was the worst performer on the FTSE 100, followed by TUI.
Performance of FTSE 100 stocks halfway through Mon 16 Mar
Source: London Stock Exchange
Most members of the FTSE are down today, although a handful of names – including Sainsbury’s and Ocado – are up. Evraz is the strongest performer so far in Monday’s session.
Federated Hermes: The coronavirus recovery will be U not V shaped
In credit markets yields on 10-year US treasury notes decreased to less than 1 per cent in response to the Fed’s rate cut, falling to 0.67 per cent last night. They are currently at 0.76 per cent.
Andrew Jackson, head of fixed income at the international business of Federated Hermes, said: “Unlike the recovery we witnessed in the first quarter of 2019, we do not expect markets to rapidly regain the losses recorded over the past fortnight.
“Rather than a ‘V-shaped’ bounce that followed previous virus outbreaks like SARS and MERS, we expect to see a ‘U-shaped’ recovery – assuming that the virus is contained in a well-orchestrated manner.”
“While the V-shaped precedent indicates a temporary economic effect, we would caution that the coronavirus seems to be spreading faster – a level of uncertainty compounded by limited knowledge of real mortality or infection rates, nor the potential for viral mutation.
“Indeed, while the market currently looks oversold, this does not mean it cannot go lower. Developments depend on the trajectory of global growth in the second half of the year and whether the pandemic can be contained. There is still a chance that credit markets could be subject to trading suspensions, effectively placing them in quarantine, as they were in 2008 and 2011.”
“It’s likely going to get worse before it gets better”
Adrian Lowcock, head of personal investing at investment platform Willis Owen, said: “Over the weekend central banks including the US Fed and the Bank of England agreed a co-ordinated response to the epidemic, promising a level of support not seen since the peak of the global financial crisis in 2008.
“However, markets remain rattled. Falls in Asia overnight have been followed by sharp sell-offs in the UK and across Europe today, with similar moves expected later in the US.
“Until we see an end in sight for the virus and the number of infections globally peak, markets are going to be extremely volatile and it’s likely going to get worse before it gets better, so investors must brace themselves in the near term.
“However, once the infection rate peaks and the world gets back to some semblance of normality, markets could snap back as fast as they fell. Trying to time this is impossible, so investors must try to ride out this crisis as best they can without giving in to fear.”
Dow Jones futures drop 1,000 points
It looks like US markets will open today with heavy losses, after Dow Jones futures plunged 1,000 points despite the Fed’s rate cuts and $700bn stimulus package.
Futures for the Dow, S&P 500 and Nasdaq all dropped around 4.5 per cent in the hours before Monday’s trading session started in the US.
Markets across Europe have sold off this morning as investors continue to fear for the health of the global economy amid the coronavirus outbreak.
FTSE drops below 5,000 despite Fed rate cut
The FTSE 100 has fallen below the 5,000-point mark this morning, plunging close to another 8 per cent despite the Federal Reserve’s rate cut and massive stimulus package to stem the impact of coronavirus.
At 09:11 this morning, the index of London-listed blue chips was trading at 4,958 after falling 408 points – or 7.6 per cent – in the first hour of Monday’s trading session.
The FTSE’s falls follow a brutal week, where the index was battered by concerns over the impact of the coronavirus pandemic on the global economy. Asian markets also had a tough session overnight, with the Nikkei 225 falling 2.46 per cent.
Fed cuts rates to near-zero and launches massive stimulus programme
The US Federal Reserve has taken interest rates down to almost zero and unveiled a $700bn stimulus package to help shore up the economy from coronavirus.
The central bank yesterday slashed rates to a target range of 0 per cent to 0.25 per cent and announced wide-ranging measures to support markets and the economy, including $700bn in asset purchases, dollar swap lines with foreign banks, expanded repurchase operations and a credit facility for commercial banks.
A statement from the Fed’s Open Market Committee said: “The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States. Global financial conditions have also been significantly affected.
“The Federal Reserve is prepared to use its full range of tools.”
The central bank had already lowered interest rates by 0.5 per cent in an emergency meeting on 3 March.
Yesterday’s move is part of a co-ordinated action plan announced by the US, the UK, Japan, the eurozone, Canada and Switzerland.