This was published 4 years ago
$1.5 trillion wipeout: Global markets plunge as virus panic grips investors
By Louis Ashworth and Alan Tovey
More than $US1 trillion ($1.5 trillion) was wiped off global stock markets on Monday as panicked investors bet that the coronavirus outbreak will cause a devastating economic slowdown.
European shares suffered their sharpest drop since directly after the Brexit vote. In the UK, the FTSE 100 plunged 3.3 per cent, its worst one-day fall for four and a half years.
Around £76 billion ($149 billion) was wiped off the value of companies across London's main market. Paris, Frankfurt and Milan were all also mired deep in the red.
Wall Street later joined the rout, with the Dow Jones plunging more than 1,000 points and closing down 3.5 per cent, suffering its worst day since early 2018.
The Australian sharemarket is poised to extend its sell-off, with futures at 8.15am AEDT pointing to a drop of 167 points, or 2.4 per cent, at the open. On Monday, the ASX shed 2.25 per cent, its worst day since August.
Oil dropped more than 5 per cent while the price of gold surged to a seven-year high as investors scrambled for safety.
Wall Street had its worst day since February 2018 on Monday.Credit: AP
Airlines, luxury firms and miners were especially hard-hit due to fears that holidaymakers will stay at home and the global economy could slow sharply, hitting demand for high-end goods and raw materials.
EasyJet led fallers among UK blue-chips to close 16.7 per cent down in its biggest drop since the EU referendum.
The sell-offs - sparked by signs coronavirus outbreaks have spread in South Korea and Italy - suggest investors are bracing for a far more severe hit from the disease than previously expected.
Last Tuesday, Jaguar Land Rover said it was just a fortnight away from running out of parts.
Traders now fear that a recovery in manufacturing will be snuffed out if the virus becomes a pandemic, with consumer demand also falling sharply as shoppers stay at home.
In Rome, the blue-chip FTSE MiB ended the day down 5.4 per cent, while in Busan, South Korea's Kospi index dropped almost 4 per cent.
Jack Allen-Reynolds, from consultant Capital Economics, said the disruption in Italy - where authorities have introduced draconian controls on travel in an attempt to control the outbreak - means another recession is now more likely than not.
Gold climbed close to $US1,700 an ounce and safe haven government debt was also in high demand. The yield on 10-year US bonds - which drops as prices rise - fell to an all-time low at less than 1.4 per cent due to a surge in buying.
Meanwhile the price of oil slumped, with Brent crude down to little more than $US55 a barrel.
Edward Moya, a senior analyst at broker Oanda, said: "Panic is hitting the oil markets as energy traders have no clue how far the coronavirus will spread. It could be a bloodbath for oil in the short-term as the risks of a global pandemic will cripple travel and trade."
With investors panicking, gold prices are soaring.Credit: Bloomberg
Traders are increasingly betting that central banks will slash interest rates to prevent an economic slowdown.
Money-market positioning suggests investors expect cuts from the US Federal Reserve, European Central Bank and Bank of England - as well as central banks in Japan, Australia, New Zealand and Canada. The People's Bank of China has already announced large-scale spending measures.
Mark Haefele, global chief investment officer at UBS Global Wealth Management, said the next two weeks will determine where European authorities can contain the outbreak.
In a note to clients, he said: "In a risk case where containment in China takes much longer or the spread abroad significantly worsens, further reductions to growth would have to be made."
Not everyone was panicking, however. Legendary investor Warren Buffett, boss of Berkshire Hathaway, said the drop was a buying opportunity.
He told CNBC: "The real question is, has the 10-year or 20-year outlook for American businesses changed in the last 24 hours or 48 hours? We certainly won't be selling."
Rupert Thompson, chief investment officer at asset manager Kingswood, believes the impact could be fleeting even if it is severe in the short term.
He said: "The disruption will hit economic activity significantly in the first quarter, with global growth very likely to grind to a halt. But we continue to believe that the outbreak is likely to follow the path of previous such health scares with growth rebounding in the second and third quarters."
It came as British drugs firm GlaxoSmithKline revealed it is working with Chinese company Clover Biopharmaceuticals to develop a possible coronavirus vaccine. Shares in US firm Gilead Sciences rose 3.3 per cent after the World Health Organisation said its experimental drug may represent the best hope of stopping the disease.
Telegraph, London