By Barbara Kollmeyer, MarketWatch
Goldman Sachs has warned that the U.K. could be pushed to the brink of recession due to the coronavirus, as British stocks joined a global market rout as fears surrounding the coronavirus returned to haunt investors.
The FTSE 100 index /zigman2/quotes/210598409/delayed UK:UKX +1.62% dropped over 2% to 6,671.54 after a 1.45% gain on Wednesday, its best day since February 4. The British pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.3734% rose to $1.2918 from $1.2873.
That’s as European stocks were under pressure and U.S. stocks dropped in early action.
Goldman urged the Bank of England to “ease monetary policy significantly,” by 50 basis points at its March meeting. “The virus outbreak is expected to push the U.K. economy to the edge of recession, the hurdle for action is low and the MPC has sufficient policy space to join other major central banks in easing policy.
The International Monetary Fund on Wednesday made $50 billion of emergency financing available to low and middle income countries, as it warned of the threat to global growth. European governments have thus far failed to announce any serious stimulus. That’s as the virus continued to swing away at global economies.
Banking giant HSBC /zigman2/quotes/208272822/composite HSBC -1.14% /zigman2/quotes/203901799/delayed UK:HSBA -1.42% was forced to clear a section of its Canary Wharf offices after an analyst was confirmed to have the virus, Financial News reported, citing sources. More grim news for the U.K. came as regional cut-rate airline Flybe collapsed, in part due to low traffic from the coronavirus.
“The coronavirus is destroying travel demand – it will accelerate the process of failure and consolidation in the European airline sector,” said Neil Wilson, chief market analyst for Markets.com.
Shares of ITV /zigman2/quotes/205378065/delayed UK:ITV +4.42% tumbled after the broadcaster warned ad spending will take a big hit from the virus, even as it beat first-quarter revenue expectations. ITV management said it was too difficult to assess further implications of the virus.
Shares of insurance and travel company Saga PLC /zigman2/quotes/205172616/delayed UK:SAGA +3.23% warned of a hit to its cruise business from the coronavirus, though it said its insurance unit would probably remain unscathed. Shares of Saga fell 11%.