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Markets hit by further losses despite US interest rate cut

Global financial markets have suffered further heavy losses despite the US Federal Reserve slashing interest rates to near zero to shore up the US economy in the face of the escalating Covid-19 crisis. The FTSE 100 index tumbled almost 8%, taking it below the 5,000 level to 4,898, its lowest level since October 2011. Shares…

Global financial markets have suffered further heavy losses despite the US Federal Reserve slashing interest rates to near zero to shore up the US economy in the face of the escalating Covid-19 crisis.

The FTSE 100 index tumbled almost 8%, taking it below the 5,000 level to 4,898, its lowest level since October 2011. Shares in Germany tumbled by 6% and there were losses of 5% in Spain and Italy, and 3% in France.

Asian stock markets had plummeted earlier, with Japan’s Nikkei down by almost 2.5%, Hong Kong’s Hang Seng by 3.7% and Australian shares by almost 10%. On Wall Street, futures for the benchmark S&P 500 Index fell 5%, triggering a halt in trading.

Leading the fallers on the FTSE 100 index was the travel company Tui, which collapsed by 38%. TUI announced at the weekend it was temporarily suspending the “vast majority of all travel operations until further notice”.

Airline stocks suffered sharp losses, with easyJet down by 30% and the British Airways owner, IAG, down by 20%. The gambling company Flutter fell 15% after a profit warning and the catering firm Compass lost 15%.

Alongside its second emergency rate cut on Sunday night, the Fed also said it would buy $700bn (£560bn) in Treasury and mortgage-backed securities as it attempts to head off a severe slowdown.

The Reserve Bank of New Zealand also stepped in, lowering its rate by 75 basis points to 0.25% at an emergency meeting. The Bank of Japan brought forward its 18-19 March meeting and kept borrowing costs unchanged but pumped more money into markets, by doubling purchases of exchange-traded funds from to 6 to 12 trillion yen and other measures.

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Data from China showed industrial production declined 13.5%, fixed asset investment tanked 24.5% and retail sales fell 20.5% in February, as the coronavirus outbreak brought the country to a standstill.

The pandemic is taking a mounting toll on businesses, with a number of warnings from companies on Monday. The owner of British Airways, IAG, and easyJet, Europe’s number three and number four airlines, said they would cut capacity drastically to try to survive the coronavirus outbreak, which has stopped people travelling around the world.

IAG said it would cut its flying capacity by at least 75% in April and May, and its outgoing boss, Willie Walsh, is deferring his retirement.

IAG has already suspended flights to China and cancelled all flights to and from Italy. To cut costs, it will ground surplus aircraft, freeze recruitment and reduce working hours.

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Walsh said: “We have seen a substantial decline in bookings across our airlines and global network over the past few weeks and we expect demand to remain weak until well into the summer. We are therefore making significant reductions to our flying schedules.”

UK airline bosses are calling on the government to step in with an immediate multibillion-pound emergency bailout.

The gambling company Flutter, which owns Paddy Power and Betfair, issued a profit warning after sports events around the world were cancelled or postponed in recent days.

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