FTSE has worst week since 2008; UK Plc coughs up £200bn

The FTSE 100 index has had its worst weeks since the depths of the financial crisis as global markets react to the impact of the coronavirus.

Increasing numbers of companies have issued warnings about the potential impact of the outbreak and spooked investors have caused shares to shed almost 13% of their value, wiping £210bn from the value of companies on the index.

The panic is global with US markets in the red and markets around the world in retreat with fears that the outbreak could have a longer-than-expected negative impact on company earnings and global growth.

‘fears that the outbreak could have a longer-than-expected negative impact on company earnings and global growth’

In total an estimated $5 trillion has been wiped about from global stockmarkets this week; the knock on effect could be that it becomes more difficult to borrow money if banks become more risks averse, and the value of pension pots will inevitably be affected.

Investors are selling shares on fears that consumers will spend less if the virus continues to spread; gold traditionally benefits as they seek a safe haven for their money, and in the UK investors are putting their money into government bonds – essentially betting on the fact that growth is going to slow the central bank is going to cut interest rates.

In an interview with Sky News, Bank of England governor Mark Carney warned that the coronavirus outbreak could lead to a downgrade of the UK’s economic growth prospects.

More than 130 listed firms in the UK had warned about the effects of the coronavirus on their business, ranging from travel companies to drinks makers, with both British Airways owner, IAG, and Diageo warning that the demand had been affected by the outbreak.

But Russ Mould, investment director at AJ Bell, told the BBC that the reaction of investors to the announcements by companies was becoming increasingly irrational.

‘Yes, the outbreak is frightening. Yes, it’s unquantifiable. But is it as bad as a traditional influenza season in the West? No.’ adding that it had killed fewer people in Europe than the French heatwave last year.

‘I don’t want to sound macabre or unconcerned about it, but it shows how stock market sentiment has shifted from being over-exuberant to having no fear at all to now having reassessed things in a more sober fashion.’