London markets in freefall as FTSE 100 hits new 13-month low
The coronavirus outbreak has continued to spook markets as the London Stock Exchange dropped to a new 13-month low and traders warned that the virus could lead to “anaemic global growth”.
The FTSE 100 leading index of the UK’s biggest listed companies has now fallen more than 7% in the past four days, and fell 2.6% in early trading on Thursday, shedding 177 points to 7,436.
Companies around the world are reporting how the outbreak was hitting profits and trading. Aston Martin warned that Chinese customers are falling, while Asian-focused bank Standard Chartered warned the economy in the region was taking a hit and Microsoft said computer sales were suffering.
But on the markets, it was airlines and holiday firms that were hardest hit, with shares in Tui, easyJet and British Airways owner IAG all down heavily.
EasyJet has suffered harder than most, with shares collapsing 26% in a week, as holidaymakers postpone trips and businesses reduce travelling.
Some traders had expected stock markets needed a “correction” because they had been trading at record levels in recent months. But some were questioning whether this was more than a correction.
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.
“If we add the fact that the crisis has only started outside China into the mix, there is a meaningful shift in stock valuations.”
There was some good news for businesses, however, as Reckitt Benckiser revealed sales of cleaning and hygiene products have increased.
Hopes were dashed on Wednesday when stock markets in the US rose in the morning, but as the day progressed they fell, with traders unimpressed with an intervention from Donald Trump.
Companies hate uncertainty, and with China accounting for 20% of the world’s manufacturing, along with high-spending middle-classes not travelling, businesses are starting to assess the impact of any long-term outbreak.