London’s stock markets tanked on Friday, with both benchmark indexes firmly entering correction territory, as the coronavirus outbreak threatened to turn into a pandemic and spark a global recession.
British Airways-owner IAG (ICAG.L) tumbled to a four-month low after the airline said it would cut flights to Italy, Singapore and South Korea, reflecting a collapse in passenger numbers.
IAG’s 9.2% fall pushed the stock to the bottom of the FTSE 100 and led the wider travel and leisure index .FTNMX5750 down 4.7% to its lowest level since 2016.
World stocks have been hammered across the board this week, with the MSCI world index .MIWD00000PUS losing nearly $5 trillion in value, as widespread disruptions to the supply chain prompted analysts to cut their forecasts for economic growth and corporate earnings in 2020.
On Friday, Citigroup predicted the corporate sector would see no earnings growth at all this year, while ratings agency Moody’s said a pandemic would trigger a global recession in the first half of the year.
“It really does look like we have further tough times ahead of us, growth wise,”
“We can expect further weakness across Asia and this will rebound to UK markets.” said Chris Beauchamp, chief market analyst at IG
Bank of England chief Mark Carney said in a Sky News interview on Thursday night that it was likely the economy would take a hit. Traders are counting on the U.S. Federal Reserve to cut interest rates next month to prop up growth.
London’s main index has lost about 13% from a peak hit on Feb. 12, as the virus continues to spread unchecked outside China, the epicentre of the outbreak.
Countries on three continents have now reported new cases, while in Europe confirmed infections in Italy reached 650 and Germany warned of an impending epidemic.