Coronavirus fears wreaking havoc for FTSE 100 firms

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Leading investment firms and FTSE 100 companies are seeking advice from governments across the world, after evidence that the coronavirus is spreading across the world and causing increased economic damage.

Several global stock markets have suffered as a result of the outbreak, and firms are trying to find investment havens in the lead up to the virus being declared a global crisis.

Shares in companies on the London Stock Exchange plummeted as COVID-19, the disease caused by the coronavirus took hold in countries outside of China over the weekend.

The FTSE 100 opened 2% down and was 257 points or 3.5% lower by mid-morning, leaving it at levels not seen since December.

Industry reaction

Investors remain complacent about an imminent Coronavirus-triggered market correction of up to 10%, warns the CEO of one of the world’s largest independent financial advisory organisations.

The warning from deVere Group’s chief executive and founder, Nigel Green, comes as global equities registered losses on Monday following a surge in cases in Italy, Iran and South Korea over the weekend, and as the first cases are confirmed in Kuwait, Bahrain and Afghanistan.

Green commented: “Global financial markets retreated on Monday as they reacted to the coronavirus headlines over the weekend. But it is likely that they will quickly rebound, as they have consistently done in recent weeks.

“Indeed, stocks keep on reaching record highs. This is because many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread – and a faster pace. This will inevitably hit financial markets and investors’ complacency leaves many wide open to nasty surprises.

“Major global companies, especially those with heavy exposure to the Chinese economy, are lowering profit guidances due to the outbreak. This will have a knock-on effect across international supply chains and throughout economies. But is the message being heard by investors?

“In addition, coronavirus has struck at a time when major economies, including Japan, Germany, India and Hong Kong are facing a downturn due to other factors such as the U.S.-China trade dispute and political protestors, which could hit the world economy.

“Until such time as governments pump liquidity into the markets and coronavirus cases peak, a near-term correction – of up to 10% – is increasingly likely. We are hoping for a V-shaped recovery, but our current view is that it will be U-shaped.

“Against this backdrop and with the ongoing uncertainty over the direction of stocks and other risk assets, multi-asset portfolios might be favoured by global investors, given that they offer diversification of risk as well as of return.”

Nigel Green concluded with a warning: “Global markets are at high valuations and the impact of the coronavirus on profits appears largely underestimated.

“In general terms, stocks have hardly been deterred by the coronavirus outbreak. This complacency is concerning. Investors need to ensure that their portfolios are coronavirus-proofed as cases jump and a market correction looks more likely.”

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