The FTSE 100 index on Wednesday tumbled below the psychologically crucial 7000 mark for the first time in a year as coronavirus battered share prices for the third day running.
Investors sold out of stocks amid fears the outbreak could spread across Europe, while the number of big companies warning of the impact grew.
-Drinks giant Diageo said profits could be hit by as much as £200 million due to the closures of bars and restaurants across its core markets in Asia;
-Mining group Rio Tinto flagged “uncertainty” over its revenues because half its minerals are sold to China;
-SSP, owner of sandwich bars chain Upper Crust, warned of “sharp declines” in passenger numbers at Chinese airports;
-Cathay Pacific put 25,000 staff on unpaid leave because of flight cancellations;
-Food group Danone alerted that the virus was hurting its business;
-Fears grew among property industry chiefs that the annual Mipim conference in Cannes could be cancelled, echoing the scrapping of Mobile World Congress in Barcelona this week. Organisers said they were “continually monitoring developments”.
However, while share prices did fall, the pace of the sell-offs eased, along with the flight to safe havens such as gold and the US dollar.
Airline and travel stocks were among the biggest fallers, with easyJet’s decline this week topping 21% and Tui’s 18% as investors reacted to news coverage of holidaymakers quarantined in a hotel in Tenerife heavily used by Tui guests.
The FTSE 100 was down 73.36 points at 6944.52, a 1% slide, while German and Italian stock markets officially entered “correction” territory, defined by a fall of 10% or more from their recent peaks. The FTSE 100 is now down 9.3% since its January high point.
Barclays European equity strategist Emmanuel Cau warned investors: “Equities are coming back to earth fast. The global virus outbreak adds material downside risks to the macro outlook and could thus continue to fuel the flight to safety.”
While companies’ equity valuations have been hit hard, so too has confidence in their ability to repay their debts.
Data from Markit showed the cost of European high-yield credit default swaps, which pay out in the event of a debt default, rose for a third day, to their highest since last August.