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Stocks tumble as coronavirus grips Europe, FTSE hits year-low

By Amanda Cooper

Spread of virus in Europe shakes equity investors

European equities dropped after a slew of new coronavirus cases emerged and the death toll rose, pushing UK stocks to one-year lows.

France reported its second death, while Greece confirmed its first case and Italy, which has put a number of northern towns on near-lockdown, reported a 12th death.

The virus, which causes Covid-19 respiratory disease, has already killed nearly 3,000 and infected almost 80,000, most of which have been in China, but its rapid spread beyond Chinese boarders has alarmed health officials and investors alike.

A top US health official warned that it was not a matter of if coronavirus spreads across the country, but when.

In London, the FTSE 100 briefly dipped to its lowest level in over a year, while German blue-chips fell to their lowest since early October. On the European markets, banks, telecoms and engineering stocks were among the biggest fallers, highlighting the investor flight from equities.

The FTSE closed down 0.35 per cent at 7,042 points, while the DAX lost 0.12 per cent on the day to close at 12,775.

The FTSE has lost nearly 8 per cent in the last week, while the DAX has lost over 10 per cent.

“We’ve now had two seismic daily declines on global stock markets. Short term traders may well choose to grit their teeth for a short-covering rally but we’re getting the impression institutional investors are materially reassessing their outlook for stocks,” said London Capital Group head of strategy Jasper Lawler.

“Nobody’s willing to ‘catch a falling knife’ with these kinds of headlines. Benchmarks in Europe look in bad shape,” he said.

The oil price fell for a fourth day in a row, bringing the loss for Brent crude futures to nearly 8 per cent, as investors have grown increasingly concerned about the impact on global energy demand from the coronavirus.

Brent was last down 0.5 per cent at $53.98 a barrel, while other industrial commodities such as copper and aluminium were broadly stable after similarly steep declines this month.

Gold, which this week hit its highest level in seven years, rose 0.2 per cent on the day to $1,638 an ounce. The price rose to $1,689.37 on Monday, its strongest level since February 2013.

The pound fell broadly, in line with losses on the FTSE. Sterling was last down 0.6 per cent at $1.2922, while against the euro, the pound fell 0.7 per cent to 84.22 pence.

Adding to the pressure on UK assets was a report from the Institute for Fiscal Studies, a think tank, that showed government borrowing this year could hit a five-year high.

Cryptocurrencies didn’t fare much better. Bitcoin was last down by around 4.5 per cent at $8,777.50 and Ethereum lost nearly 12 per cent to trade around $218.90.

FURTHER READING: UK government deficit could balloon to five-year highs - think tank

FURTHER READING: ECB’s Lagarde calls for euro zone governments to use fiscal measures

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