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Coronavirus sparks stock market “Black Monday”

World shares have suffered their worst day since the financial crisis of 2008 amidst the threat of coronavirus.

Yesterday London’s index of top shares fell by 8%, with the main US financial indexes falling by 7% – sparking fears of a recession.

While the coronavirus’s impact on travel has had an impact, crude oil prices have also fallen by 22% due to a disagreement between Saudi Arabia and Russia on managing supply.

A drop in stock prices in the New York Stock Exchange triggered so-called circuit breakers, which halt trading for 15 minutes to prevent further falls.

Chris Towner, director at Chatham Financial, said: “The coronavirus is spreading globally and with it, economic fears are spreading also. Fear often comes from dealing with the unknown and it is the unknown scale of the impact of the virus that is putting pressure on the financial markets.

“For those that have been in the market for a while comparisons are already being made to the financial crisis of 2008 and 2009.

“Trade and travel are the first targets as restrictions are implemented. This has hit oil as well as share prices and the real question is how much more of a negative impact can this virus have and for how much longer?”

Ayush Ansal, chief investment officer at Crimson Black Capital, said: “The FTSE’s collapse on Monday morning shows the markets have passed from panic mode into pure hysteria.

“Markets were at breaking point before Saudia Arabia’s decision to launch an oil price war, but this latest development has taken them beyond that.

“Any positive news around the coronavirus is being ignored outright, while negative developments are being catastrophised.

“Markets will always be irrational but Monday morning saw the end of reason.”

Emma Wall, head of investment analysis, Hargreaves Lansdown, reckoned markets are likely to rebound.

She said: “Well if the markets follow the pattern established over the past month, sudden market drops have been followed by similarly acute intra-day upswings as the market absorbs the news and recalibrates its outlook.

“Looking ahead to the coming weeks, investors should expect the only certainty to be volatility.

“Those investing for the long haul – and that is, almost all of us – should hold on tight, it’s going to be a bumpy ride but this period will matter little over the long term.”

Ulas Akincilar, head of trading at the online trading platform, INFINOX, said: “There’s a fine line between self-fulfilling prophecy and outright panic. Several markets just crossed it.

“The triggering of America’s equity market circuit breakers, which halted trading on the major US markets for 15 minutes, brought a brief moment of respite and reflection – rather than recovery.

“US consumers may be relishing the imminent prospect of $2 a gallon gas, but the country’s huge oil industry has been sucked into the vortex of a global crude price war, the flames of which have been fanned by the coronavirus.”

He added: “This is no mere Opec-inspired spat. With Saudi Arabia adopting a ‘pump or die’ strategy, the market is being flooded with supply just as demand plunges in the face of Covid-19 and its chilling effect on travel and trade.

“Rarely do two such powerful forces combine to such rapid – and toxic – effect on both equity and oil prices. Cryptocurrencies, once seen as a useful hedge in the face of such turbulence, have also been pulled into the maelstrom.

“Only the most conventional of safe havens – bonds – are thriving today [Monday] as many go short on a market that it’s widely assumed will get worse before it gets better.”

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