The FTSE 100 (FTSE) nosedived on Monday morning amid “utter carnage” on global stock markets, with investors fleeing as the price of oil plummeted and the coronavirus crisis deepens.
The value of Britain’s leading listed companies plummeted by 8.7% as markets opened, in the fourth biggest one-day fall on record.
The sell-off had wiped more than £122bn ($159bn) off the value of London’s 100 most valuable listed companies by around 9am. Shares were trading 7.1% lower at levels not seen since 2016.
“This will be remembered as Black Monday. If you thought it couldn’t get any worse than the last fortnight, think again… it’s utter carnage out there,” said Neil Wilson, chief market analyst at Markets.com.
Wilson also warned the “hideous” declines in company stocks should be feared, as it could have a significant real impact on firms. It could lead to an “aggressive tightening in credit that can spiral into real financial distress,” he said.Subscribe to Yahoo Finance:
It comes as investors react to both fresh coronavirus fears and the falling price of oil, which dropped 30% as Saudi Arabia launched an price war overnight. Societe Generale analyst Kit Juckes said the oil shock “dwarfed” the outbreak in its significance for markets, with the decision to slash prices an “unwelcome brake” on growth in oil exporters like the US, Russia and Brazil.
Every FTSE 100 company was in the red, but oil companies took the biggest rout on the news. BP (BP.L) trading 26.7% lower and Royal Dutch Shell (RDSB.L) opening 19% lower.
Emma Wall, head of investment analysis at Hargreaves Lansdown, said the FTSE had dropped more than 20% since mid-February, “taking us officially into bear market territory.”
“The oil price shock has totally unnerved investors, while Italy’s decision to quarantine 16 million citizens in the north of the country has left markets feeling like the coronavirus outbreak is out of control – where next?” added Wilson.
Investors worry about the impact of both the virus and containment measures like travel bans on the global economy, with a hit to spending, output and supply chains. Much of northern Italy, including its financial capital Milan, were put into full-scale lockdown and cases in the UK increased over the weekend.
Other European markets also opened sharply in the red. In Germany, the Dax (^GDAXI) index of its leading firms was trading 6.2% lower than when markets closed on Friday. In France, the CAC 40 (^FCHI) was down 6.7%. Asian markets had closed between 3% and 5% lower overnight.
Futures were also pointing to a sharp fall in US stocks when markets open later on Monday. S&P 500 futures (ES=F) and Dow Jones Industrial Average futures (YM=F) were both trading 4.9% lower, while Nasdaq futures (NQ=F) were 4.8% lower at around 5am eastern time.
“Markets have gone into panic mode, pure and simple,” said Kyle Rodda of trading firm IG.
“The plunge in the oil price has raised major credit risks in financial markets, which are already reeling from the expected slowdown in global growth because of the coronavirus,” he told the Guardian.
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