(Alliance News) - Stocks in London plummeted on Thursday amid fears world leaders are not doing enough to counter the threat of the coronavirus and following US President Donald Trump's ban on travel from Europe.
Trump said late Wednesday the US will not allow travellers from the EU's Schengen border-free zone into the country for 30 days, calling the move an "aggressive" effort to contain the spread of Covid-19, the disease caused by the new coronavirus.
The decision does not affect visitors from Britain and Ireland, or US citizens returning from Europe.
In response, European leaders argued that travel restrictions are ineffective because the virus has now spread almost worldwide, and lamented that Trump had not consulted them first.
The FTSE 100 closed down 639.04 points, or 11%, at 5,237.48, its lowest level since 2012.
The FTSE 250 ended down 1,621.81 points, or 9.4% at 15,717.42, and the AIM All-Share closed down 62.57 points, or 7.8%, at 7,35.09.
The Cboe UK 100 ended down 9.7% at 8,969.78, the Cboe UK 250 closed down 9.8% at 13,820.33, and the Cboe Small Companies ended down 6.1% at 9,955.71.
After the London market close, UK Prime Minister Boris Johnson said the UK would not follow Ireland in closing schools due to the virus pandemic, but the government is considering banning major public events. Johnson said the most dangerous period the outbreak is still a few weeks away, and the government has a clear plan to respond.
On the continent, the CAC 40 in Paris and DAX 30 in Frankfurt both ended down 12%.
"Investors were already reeling from Trump's rather poorly handled address last night, and to throw an ECB mis-step in on top of this was more than they could handle. As a result, there is still no sense of a firm floor in place for risk assets, and the 'bear market' headlines that will greet investors over the next 24 hours will only serve as a cue for more selling," said IG Group's Chris Beauchamp.
In the FTSE 100, not a single stock ended in the green as travel stocks bore the brunt of Trump's travel ban.
TUI closed down 17%, easyJet down 14% and British Airways-owner International Consolidated Airlines Group, down 16%.
In addition, Carnival closed down 18% after the cruise line operator said its Princess Cruises division will voluntarily pause its global operations in response to the "unpredictable circumstances" evolving from the spread of Covid-19 virus.
Berkeley Group closed down 11% after the housebuilder said it will postpone an increase in its shareholder returns until it has certainty on the affects that the coronavirus will have on trading.
In the FTSE 250, Finablr closed down a massive 80% after the foreign exchange provider warned on its cash position.
Abu Dhabi-headquartered Finablr, which owns the Travelex currency exchange brand, is taking "urgent" steps to look into liquidity and cash flow. This has been hit by a number of issues, Finablr said, including the spread of Covid-19 around the world, a recent credit downgrade on Travelex's bonds, a liquidity squeeze, and a perception in the market that NMC Health's governance problems also relate to Finablr.
Finablr is part of NMC Health founder BR Shetty's business empire. NMC shares are suspended from trading in London.
The pound was quoted at USD1.2512 at the London equities close, down significantly from USD1.2880 at the close Wednesday, as the dust settles from the UK government budget and Bank of England interest rate cut on Wednesday. Sterling touched an intraday low of USD1.2491, its lowest since October.
In his maiden budget, Chancellor of the Exchequer Rishi Sunak pledged GBP30 billion to support the UK economy against the threat of the coronavirus.
Commerzbank economist Peter Dixon said: "The UK yesterday unveiled a coordinated package of monetary and fiscal measures to tackle the economic fallout of COVID-19 in a move which other governments may seek to copy. But the fiscal package also pointed to a big boost in infrastructural spending.
"Whilst this is good politics, it is also a recognition that monetary policy cannot be expected to do all the heavy lifting. But a fiscal expansion will entail a significant increase in borrowing. It may thus be incumbent on the government to think about using alternative fiscal instruments such as the public sector balance sheet to create some additional policy headroom."
The euro stood at USD1.1077 at the European equities close, down from USD1.1264 late Wednesday, after the European Central Bank's measures announced Thursday to support the economy fell short of expectations.
ECB President Christine Lagarde urged governments to take "ambitious" and "coordinated" fiscal action to counter the Covid-19 shock.
Her remarks came after the ECB kept eurozone interest rates unchanged, but unveiled a EUR120 billion boost to net asset purchases and cheap loans for banks on "considerably more favourable terms", known as TLTROs.
The central bank said it will add a "temporary envelope" of additional net asset purchases of EUR120 billion to the Asset Purchase Programme until the end of the year, in combination with its existing EUR20 billion a month QE programme.
The Frankfurt-based central bank kept its interest rates on main refinancing operations, the marginal lending facility and the deposit facility all unchanged at 0.00%, 0.25% and minus 0.50%, respectively.
"The ECB came into this meeting with volatility and fear dialled to a max; that isn't easy. That being said, today's performance will go down as a catastrophic failure on the part of the ECB. It is one of the world's largest central banks, and today markets were crying out for a backstop; they got anything but. Lagarde spent significant energy on the press conference calling on fiscal policy coordination as the key tool to deal with the fallout from Covid-19. This is self-evident, but it is also extremely tone-deaf at the current juncture," said Pantheon Macroeconomics.
Against the yen, the dollar was trading at JPY105.62, up from JPY104.94 late Wednesday.
Stocks in New York were deeply in the red at the London equities close as anxiety was elevated after the Dow entered bear market territory on Wednesday, as the spread of the virus further damaged economic activity in the US.
The DJIA was down 4.0%, the S&P 500 index down 3.9% and the Nasdaq Composite down 4.1%.
Trading was suspended at the open after a 7% fall by the S&P 500 index, a benchmark that triggers circuit breakers halting transactions to manage a crisis.
The US National Basketball Association suspended its season "until further notice" after Utah Jazz center Rudy Gobert tested positive for the coronavirus.
In addition, US Treasury yields fell further in an indication of more fear in the market.
Brent oil was quoted at USD32.82 a barrel at the London equities close, down sharply from USD36.02 at the close Wednesday.
"Oil prices are about to getting uglier. The initial shock of Trump's EU travel ban will deliver another blow to demand forecasts. Brent crude seems poised to sell off another 10% here as the demand outlook seems like it will only get worse, oversupply concerns are not going away as the Saudis and Russians ramp up production, and after a key super-contango threshold was reached, suggesting for some another plunge is upon us," said OANDA analyst Edward Moya.
Despite its safe-haven appeal, gold was quoted at USD1,572.65 an ounce at the London equities close, down from USD1,649.40 late Wednesday.
The economic events calendar on Friday has Germany inflation readings at 0700 GMT.
The UK corporate calendar on Friday has annual results from industrial fastenings supplier Trifast.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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