Global financial markets see sharpest fall in years after rise in coronavirus cases

25 February 2020

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Market news

Global financial markets saw some of the sharpest falls in years on Monday - and were struggling again this morning - after a rise in coronavirus cases renewed fears about an economic slowdown. The three main American indices fell by about 3%, whilst the FTSE 100 fell 3.3%, its sharpest drop since January 2016. The falls were reflected across Asia, with Tokyo stocks dropping more than 3.5% at this morning's open. Investors were alarmed on Monday by the number of cases reported in Italy, a reminder that the epidemic could turn into a global, rather than largely Asian, problem. 

Meanwhile Donald Trump has asked Congress for $2.5bn to fight the coronavirus, including more than $1bn for vaccines, the White House announced on Monday. The fund plan aims to accelerate vaccine development, but will also be used for therapeutics and the stockpiling of personal protective equipment such as masks. 

Japanese GDP for the fourth quarter fell by 6.3% annualised versus the previous quarter. Whilst a hit to growth was anticipated given October's increase in consumption tax from 8% to 10%, the fall was larger than many analysts were expecting. 

In Germany, an influential survey has suggested that the country's economy is set to stagnate for another quarter, as businesses struggling with the manufacturing slump are hit by coronavirus and trade tempests. The Ifo business climate index edged up in February, but remains in very weak territory. 

In the UK, retail sales rebounded in January on the back of stronger demand for clothes and footwear. Sales rose 0.9% after falls in the previous two months, making January the strongest month since last March. Meanwhile, inflation rose to a six-month high as petrol and house prices rose. The Consumer Prices Index (CPI) was 1.8% last month, up from 1.3% in December. 

Stock focus

New York activist hedge fund Third Point has demanded the break-up of Prudential after building a near 5% stake in the insurer. Third Point is calling for the British blue-chip to split its US life insurance business Jackson from its high-growth Asian operations, arguing the company is heavily undervalued because the two arms are tied together. 

Barclays is preparing to seek a replacement for boss Jes Staley, amid speculation over his links to disgraced financier Jeffrey Epstein. Mr Staley, who took over as chief executive in 2015, has reportedly told colleagues he expects to leave by the end of next year. 

Lloyds Bank posted a 26% drop in pre-tax profits to £4.4bn as it paid out a further £2.5bn to customers in PPI compensation. The company saw a “significant increase” in queries about PPI claims ahead of a deadline to claim in August last year. It brings the total paid out by Lloyds over the PPI mis-selling saga to £21.9bn. 

Shares in UK engineering company Meggitt fell by 4.5% at the start of trading this morning after it warned that the coronavirus outbreak will hit its growth. The company, which makes components for the aerospace, defence and energy markets, told shareholders its key markets will suffer from the spread of the virus. 

Meanwhile the impact of the coronavirus outbreak on companies' supply chains is becoming more marked. Jaguar Land Rover has said it has had to fly in small car parts, such as key fobs, in suitcases as the outbreak hits the company's supply chain. It warns that it could start to run out of Chinese parts for its UK factories within a fortnight. 

Countrywide and LSL Property Services have said they are in talks over a possible merger which could create the UK's largest estate agency. If the merger talks lead to a deal, it will create a combined group worth about £470m with 14,000 employees. 

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