Coronavirus: Dow Jones records biggest points fall in history

Global markets extended recent falls to slip more than 10% below recent highs as fears over the virus’s economic impact deepened. Pic: Photo Courtesy

Coronavirus: Dow Jones records biggest points fall in history

New York’s Dow Jones has recorded its biggest one-day points fall in history as the coronavirus stock market sell-off gathered pace. The Wall Street index fell by 1,191 points, or 4.4%, as share indices across the globe entered “correction” territory amid heightening worries about the economic impact of the outbreak. It put US markets on course for their worst week since October 2008 – at the height of the financial crisis. Earlier on Thursday, the FTSE-100 suffered its biggest one day fall in percentage terms since August 2015. Markets in London, Europe, and the US were in so-called “correction” territory after the latest declines – meaning they have lost more than 10% of values off their most recent highs.

The FTSE’s fall of 3.49%, or 246 points, knocked £62bn off the combined value of the its constituent companies – and meant they are £152bn down over the course of the week so far. The latest falls came after declines in Asia overnight linked to the latest COVID-19 developments including confirmation that a woman had been reinfected in Japan. South Korea reported its largest daily spike in cases while news of the first confirmed COVID-19 case in California that was not related to travel abroad also spooked sentiment. The mood was not helped by an updated forecast from US investment bank Goldman Sachs that American companies would fail to generate earnings growth this year because of the crisis.

Travel and airline stocks took the bulk of the punishment again in London – with easyJet losing nearly 8% and the owner of British Airways, IAG, seeing a similar decline. Leading the fallers was advertising group WPP after it reported a sharp slowdown in sales and staff travel restrictions because of COVID-19. Its shares were 16% off, hitting levels not seen since 2012. Elsewhere Budweiser and Stella Artois maker AB InBev, the world’s biggest brewer, forecast a 10% decline in first-quarter profit after the virus hit beer sales over the Chinese new year. Shares fell 11%.  The sell-off is mostly a consequence of worries about damage to the world economy. While China, the world’s second largest economy, has been widely praised by health experts for its efforts to contain the outbreak this year, it has come at a huge cost to output in the manufacturing powerhouse.

Widespread factory closures and restrictions on movement have left businesses at a standstill and struggling to secure supplies when production has been able to resume. The research consultancy Capital Economics has forecast Chinese growth to contract this year, from levels around 6% over the past two years. Its chief Asia economist Mark Williams and senior China economist, Julian Evans-Pritchard, wrote: “The longer it continues, the more likely it is that some firms won’t be able to pay workers, and will have to either cut pay, lay people off or shut down altogether.” Investors have been seeking safe havens over fears Europe and the United States will follow Asia and be forced to bring in disruptive controls of their own to contain the virus. Gold is currently trading at levels not seen since 2016 while yields on 10-year US government bonds also hit fresh record lows on Thursday.

Oil prices are crumbling too – at 2018 values – with Brent crude oil sliding below $51 a barrel on fears of a slump in demand. In addition to the surge in coronavirus cases, a growing number of international firms have been reporting a financial impact. Microsoft said on Wednesday night that its supply chain was returning to normal “at a slower pace than anticipated” after China shutdowns were concluded. On Thursday, Asia-focused Standard Chartered bank admitted a key earnings target would take longer to achieve because of the virus controls. John Menzies, the UK-listed aviation services business, estimated a £6m-£9m hit to annual profits from the virus but added that was based on the assumption the worst would be over by June. Aston Martin, the struggling luxury car brand, warned of a hit to sales in China as it reported that pre-tax losses had doubled in 2019. Meanwhile, Bank of England deputy governor Sir Jon Cunliffe told a panel discussion in London that central banks could do little to offset a supply shock caused by something like COVID-19. He told the event there was scope for the Bank to provide support in the case of an economic downturn, but there was no need to reach for the “panic button” yet.