FTSE set for biggest weekly drop since 2011

FTSE set for biggest weekly drop since 2011

The growing coronavirus crisis has left UK shares facing their biggest weekly drop in more than eight years as the share prices of travel and tourism companies plummet.

The FTSE 100 has fallen more than three per cent today and over 8.5 per cent since markets opened on Monday — its biggest weekly dip since the first week of August 2011 when the eurozone debt crisis peaked and the index tumbled by 9.7 per cent.

Other market indices have also slumped. As of mid-afternoon, Europe’s benchmark Stoxx 600 was also set for its worst week since 2011. The S&P 500 has fallen 9 per cent, equivalent to its worst weekly drop since 2008.

Travel and tourism companies are among the worst affected within the FTSE 100. Easyjet is down almost 28 per cent in a week, while International Consolidated Airlines Group, the parent company of British Airways, is down almost 20 per cent.

Carnival — a British-American cruise operator and one of the world’s largest travel leisure companies — has seen a fifth knocked off its share price, while tourism business TUI AG has lost 24 per cent.

Market-sensitive financials firms have also suffered, with M&G, Legal & General and Standard Life Aberdeen down more than 10 per cent.

WPP, the world’s largest advertising company, lost 16 per cent today (February 27) alone after poor results, and is down 22 per cent over the last week.

The markets had previously been slow to react to the virus. Last month Fidelity’s China Special Situations manager, Dale Nicholls, predicted the virus was likely to be less deadly than the Sars pandemic of 2002, and thought investor confidence would recover relatively quickly.

But in recent days investors been knocked as the virus has quickened its spread from Asia-Pacific and cases have been found in South Korea and Italy.

Today the US announced its first possible case in which the patient not traveled to China or been exposed to other patients.

Ben Yearsley, investment consultant at Fairview Investing, said the “obvious” reason for the FTSE 100’s tumble was the spread of coronavirus and the impact on global growth.

He added: “You have to make the assumption this will have a short-term impact and not a long-term problem. Assuming it is brought under control, the sunnier outlook seen post the general election should resume.”

Director of communications at Tilney, Jason Hollands, agreed, adding that until recently the market had proven “remarkably sanguine” in response to the virus but the surge in Italy had proven a “game-changing moment”.

Mr Hollands thought European equities were more vulnerable to the crisis as they had greater exposure to cyclical stocks and exporters. Thus far, however, UK stocks have underperformed other regions, in part due to the number of commodities companies in the index.

Adrian Lowcock, head of personal investing at Willis Owen, agreed the markets had been relaxed up until now, adding the recent cases had “bought [the virus] more to home” and increased the possibility it could become a global issue.