FTSE 100 sell-off intensifies as Trump’s travel ban spooks investors

Year-to-date the FTSE 100 is now down over 22%, placing the market firmly in bear territory.

The FTSE 100 has continued its slide, falling by over 6.5% in its first hour since opening. At the time of writing (9.30am), the index is now down around 5.9%.

Year-to-date the FTSE 100 is now down over 22%, placing the market firmly in bear territory, as coronavirus fears continue to spook investors. It is becoming increasingly apparent that the spread of the virus will be global, causing major demand and supply shocks to economies around the world.

Specifically, in regards to today’s latest heavy sell-off, investors appear to be reacting to the news announced by US president Donald Trump that the US is putting in place a travel ban on the 26 European Union member states that are part of the Schengen common visa area for 30 days.

Predictably, airlines have been the worst hit, with IAG Group, which owns British Airlines, down around 10%. European airlines took the brunt of the sell-off, with Air France-KLM down 17% and Lufthansa 9%.

European markets as a whole took a hit, with Germany’s Dax Performance, France’s CAC-40 and the Eurostoxx 50 index all down by over 6%.

However, markets were not just reacting to a new travel ban and the decline in passenger numbers. The announcement by the White House is also a signal that those in authority are expecting the outbreak of the virus is serious enough to justify measures that will prove majorly disruptive to the global economy.

Added to this, the Wealth Health Organisation has labelled the outbreak a “pandemic” for the first time. Any lingering hope that the economic effects of the virus and attempts to contain it will be minimal or shortlived are quickly disappearing. 

Richard Hunter, head of markets at interactive investor, notes “these are unquestionably dark days for investors.”

He adds: “The latest pronouncement from the US has exacerbated the sour mood, with a travel ban from Europe dealing another blow to the beleaguered tourism and travel sector. At the same time, the lack of any specific positive measures in the update has given markets an additional and unwelcome hit to factor in to share prices.

“Notable by its absence at the moment is any good news. The coronavirus has yet to peak, the oil price is under renewed pressure (although this may prove positive for consumers in the medium term) and only a fraction of the eventual economic cost has been confirmed, even though a growing number of companies are valiantly trying to put a figure on the hit to their earnings. Meanwhile, there is nowhere to hide, with even the traditional haven of gold in negative territory today.”

Ayush Ansal, chief investment officer at Crimson Black Capital, notes coronavirus “has triggered a chain reaction across markets that could prove unprecedented.” He adds the European travel ban has “created a perfect storm for markets”, while predicting the global economic fallout from current events “could continue for months if not years.”

Ansal also notes that further declines in the UK’s major index are inevitable, particularly if the government’s emergency Cobra meeting later today (Thursday 12 march) results in the announcement of significant new measures to counter the virus.