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(Alliance News) -Â London's index of blue-chip stocks on Monday slipped below 5,000 points for the first time since 2011 as an emergency interest rate cut by the US Federal Reserve was unable to calm markets.
The FTSE 100 index was down 367.51 points, or 6.9%, at 4,998.60, below the 5,000 level for the first time since 2011.
The FTSE 250 was down 1,887.23 points, or 12%, at 13,674.77, and the AIM All-Share was down 11% at 660.26.
The Cboe UK 100 was down 6.3% at 8,448.31, the Cboe UK 250 was down 13% at 11,865.18, and the Cboe Small Companies down 5.9% at 9,223.83.
In European equities on Monday, the CAC 40 in Paris was down 9.2%, while the DAX 30 in Frankfurt was down 8.0%.
"If we wanted another reminder that monetary policy has failed as a tool to combat market pessimism, this weekend's Fed bazooka has provided exactly that," said Joshua Mahony, senior market analyst at IG.
The US central bank on Sunday made its second emergency rate cut in less than two weeks, lowering the benchmark borrowing rate to a range of 0.00%-0.25%, where it was during the 2008 global financial crisis, and pledged to keep it there "until it is confident that the economy has weathered recent events."
The central bank also announced massive asset purchases, opened its discount-lending windows to banks, making it easier for them to borrow from the Fed and urging them to use it to help businesses and households.
Economic activity in the second quarter will be "weak", however, the chance of recession this year will depend on how soon the pandemic impact can be contained, Fed Chair Jerome Powell said in a press conference following the rollout of drastic emergency measures.
Powell said fiscal measures from the government will be "critical", and applauded the measures being considered by Congress.
"Despite an almost unprecedented easing package that took rates to near zero and implemented a fresh QE programme, US markets are currently set to open limit down later today," said IG's Mahony. "With governments and central banks running low on bullets, markets will soon run out stimulus announcements that have sought to shake off the current bearish sentiment permeating through financial markets."
Wall Street is set for yet another stomach-turning open. The Dow Jones is called down 4.5%, the S&P 500 down 4.8% and the Nasdaq Composite down 4.5%.
US airlines are poised to lead the fall. Delta Air Lines shares were trading down 15% pre-market and United Airlines down 17%.
The carriers have announced drastic reductions in flights after US President Donald Trump's administration banned foreign travellers arriving from Europe.
American Airlines said it would reduce all international capacity by 75%.
"This suspension will last through May 6," American said. "This change is in response to decreased demand and changes to US government travel restrictions due to coronavirus."
It also said domestic service would be reduced by 20% in April compared to last year.
Competitor Delta said it would "significantly reduce its US to Europe flying beginning Monday, March 16, following the US government directive restricting travel between the US and Europe." This was later extended to cover the UK and Ireland as well.
In London early Monday, Ryanair said it expects travel restrictions to result in the grounding of the majority of its aircraft fleet across Europe over the next seven to ten days. For April and May, Ryanair said it now expects to reduce its seat capacity by up to 80%.
International Consolidated Airlines Group, easyJet and Wizz Air Holdings also warned of major disruptions to their operations.
British Airways parent IAG said its first-quarter capacity, or available seat kilometres, is expected to fall 7.5%. In April and May, IAG will reduce its capacity by about 75% compared to the year before. IAG also is planning to ground surplus aircraft.
Ryanair shares were down 18% at midday, IAG down 23%, easyJet down 22%, and Wizz Air down 22%.
Airlines were not alone in warning about financial damage from the pandemic, with B&Q owner Kingfisher expecting a hit from store closures in France and Spain.
Kingfisher said that, up to the past Saturday, the company has not experienced any dent in sales from the Covid-19 pandemic.
In February, the company's like-for-like sales were 7.6% higher. Excluding the benefit of the extra day for Leap Year, like-for-like sales were up 2.3%. February 29 fell on Saturday.
In the first two weeks of March, up to and including this past Saturday, Kingfisher said sales "continued to be positive".
"However, there is significant uncertainty on sales and demand as the outbreak spreads, and as central governments and businesses take action to contain and delay its impact," Kingfisher added.
All 221 of the company's Castorama and Brico Depot stores were closed on France, starting Sunday, until April 14 - following a decision by the French government to close all non-essential places used by the public. In addition, all 28 stores in Spain have closed until Sunday March 29, following the government's declaration of a two-week state of emergency.
Kingfisher shares were down 22% at midday.
The dollar was lower against both the euro and the safe-haven Japanese yen following the Fed's rate cut.
The euro traded at USD1.1170 midday Monday, up from USD1.1075 late Friday. Against the yen, the dollar was quoted at JPY105.96, down from JPY107.22.
The pound, however, slipped.
Sterling was quoted at USD1.2290 at midday, lower than USD1.2392 at the London equities close on Friday.
"Whether the UK strategy of only restricting movement for the elderly and those with pre-existing conditions is the right one, the sharp decline in the pound does highlight the perception of risk that goes with breaking from the wider strategy of minimising all possible transmissions," said IG's Mahony.
Prime Minister Boris Johnson will chair an emergency meeting of the Cobra committee on Monday afternoon before addressing the first of the daily press conferences being planned to update the public on Covid-19.
As the UK death toll reached 35 on Sunday, Health Secretary Matt Hancock said that over-70s could be told to stay home for up to four months within the "coming weeks". Johnson was expected to discuss the proposal, as well as banning mass gatherings and isolating entire households if one member shows symptoms, during the emergency meeting.
In commodities, gold was quoted at USD1,477.41 an ounce on Monday, still dramatically up from USD1,356.80 late Friday but retracing some earlier gains. The precious metal had traded in excess of USD1,550 overnight.
"Once again, gold isn't coping overly well with the latest stock market rout. While it's only a little over 10% from its peak, you would typically expect it to perform well in such risk-averse conditions. But the huge down days are proving just as problematic for the yellow metal as the up days, with margin covering taking its toll," said Craig Erlam at Oanda.
Meanwhile, oil prices have been "whacked", said Erlam.
Brent oil was priced at USD30.80 a barrel, down from USD33.07.
"Brent is back scraping its March lows and threatening a break of USD30. How much further it will go depends on just how much Saudi Arabia and Russia have the stomach for a prolonged price war and whether either is prepared to wait for the US shale companies to run into difficulty," said Erlam. "Fortunately, low oil prices are one of the few positives for consumers and many businesses as we all head for recession."
By Lucy Heming;Â lucyheming@alliancenews.com
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