The stock market this week suffered its worst one-day losses since 1987 as coronavirus panic gripped investors. Yesterday (Thursday) the UK’s FTSE 100 stock market shed 10% of its value – equalling £160.4 billion – while in the USA, the S&P 500 lost 9.5% and the Nasdaq saw 9.5% wiped.
The rate of decline was so great in the US that trading was automatically stopped for the second time in a week, but shares continued to plummet when trading resumed. This came after US president Donald Trump announced a ban on all flights from mainland Europe to the US for 30 days, a decision the EU said was taken unilaterally and with no prior warning.
Delta and American airlines plunged 20% in the aftermath of this announcement, Tui lost 17% and IAG, owner of British airways saw 15% of its value eroded. Budget airline Norwegian announced that it was halting 40% of its flights and temporarily laying off half of its staff. Both Princes and Viking Cruises said they would not sail for 60 days as governments advise older passengers from taking cruise holidays and Disney said it would shutter its theme parks in California.
Trading was also halted automatically in Brazil due to steep declines there, while Japan’s Nikkei 225 was down 4.4% by end of day yesterday.
The markets seem not to have been calmed by UK and US interest rate cuts earlier this week and late last week, with experts saying the panic could be here to stay as no-one knows what to expect.
The acting chief economist at bank Wells Fargo Jay Bryson said, “It looks increasingly likely that the coming contraction will be deeper and more protracted than we were anticipating just a few days ago. The airline and hotel industries are in free fall, and there will be multiplier effects.”
BBC News Business Correspondent Dominic O’Connell says the stock market fall and EU-US travel ban could cause significant disruption and further worry investors – which could lead to additional losses. He explains, “What may have spooked [investors]… is President Donald Trump’s decision to stop most travel between continental Europe and the United States… There is also a small but telling detail – Mr Trump first said the ban would apply to cargo flights, but then corrected himself to say it would not. A big proportion of cargo, however, is carried in the belly holds of passenger aircraft. If there are no passenger flights, there will be much less cargo, an enormous disruption to exporters and manufacturers on both sides of the Atlantic.”
What is clear from all of this is that we are likely to see further losses on stock markets and increasing talk of the coronavirus pushing nations into recession as businesses are forced to close and supply chains are severely disrupted. This is a prime moment to buy gold – the precious metal is a safe-haven asset and only increases in value as markets declined. Buy now to safeguard your portfolio from coronavirus disruption.