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Markets panic

Shares plunge as central banks fail to halt virus fears

Heathrow

Planes are being grounded as demand for flights slumps

Investors fled stock markets despite measures to prop up the economy taken overnight in the US.

Coordinated stimulus actions by central banks across the world failed to calm panic-stricken investors.

The FTSE 100 index of leading shares plummeted more than 7% at the open, sending it below the 5,000 level just weeks after talk of it bursting through 8,000 and adding to a 17% drop last week.

An hour ahead of the close, and despite a sharp fall on Wall Street, it had clawed back some ground and was 4.4% or 235 points lower at 5131.

Late on Sunday the US Federal Reserve launched a $700bn assets purchase plan and cut interest rates by almost 1% to between 0.25% and zero in an effort to boost the US economy. It is the second cut by the Fed in a week.

However, stocks in Asia plunged and Europe followed suit.

Airline stocks took the biggest hit as major airlines including Virgin Atlantic and easyJet said some would struggle to survive with state intervention.

ICAG, the owner of British Airways, slid 19% after saying it would cut its flying capacity by at least 75% in April and May. Share of EasyJet and TUI were down 31% and 24%, respectively.

Analysts believe the action by governments, far from helping, is contributing to the panic, and is also unnerving investors who fear central banks will have nothing left in their armoury.

Ulas Akincilar, head of trading at the online trading platform, Infinox, said: “European and Asian markets began the trading week with another sharp plunge, and the sheer scale of the Fed’s rate cut played a big role in the desertion of investors’ confidence.

“The issue is that this second emergency rate cut takes US interest rates virtually to zero. Having fired off nearly all its monetary policy ammo in the space of just a few weeks, the Fed can no longer use interest rate cuts as a way to intervene in future.”

Russ Mould, investment director at AJ Bell said: “The US Federal Reserve’s unscheduled half-point interest cut rate on 3 March provoked shock rather than awe as investors took fright that the American central bank – and its global counterparts – was running low on policy tools.”

Nigel Green, the chief executive and founder of deVere Group, said: “Any way you look at it, it’s now almost certain that there will be a coronavirus-triggered recession as both global supply and demand are impacted.

“We can expect this recession to be deep but short. The slowdown will be temporary because it’s not caused by deep-rooted problems and imbalances in the economy, rather by a wholly unexpected shock that’s gripped the world.”

At 9am the FTSE 100 was 402 points or 7.49% lower at 4963.95.

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