20 ★ Friday13 March 2020

Robin Wigglesworth

Markets Insight

Cruise ship operators tumbled to their
lowest levels in at least 10 years after
Carnival aid it was suspending voyagess
of all its 18 ships operating under its
Princess Cruises brand for two months.
Princess Cruises, which Stifel analysts
said “generally targets an older
demographic and offers longer duration
itineraries”, accounts for about a fifth of
Carnival’s fleet capacity.
Analysts expect similar measures from
Royal Caribbean Cruises nda Norwegian
Cruise Line, which were hit by worries
that deposit refunds for cancelled cruises
had the potential to cause a cash crunch.
Hoteliers, casino operators and travel
stocks such asExpedia ell amid the USf
travel ban from continental Europe.
The airline sector suffered a record
intraday fall withAmerican Airlines,Delta
Air Lines nda United Airlines ll losinga
more than 10 per cent of their value.
The threat of regional lockdowns and
weakened consumer confidence slammed
retailers such asCapri,L Brands,Macy’s
andNordstrom.
Occidental Petroleum allied after Carlr
Icahn revealed a 9.9 per cent stake.
The activist investor predicted a near-
to mid-term oil price recovery and said
sector consolidation should deliver
“strong bids” for Occidental.Bryce Elder

Wall Street Eurozone London

Dufry, the duty-free shop operator, led

the Stoxx 600 fallers. Full-year results

from Dufry were “essentially in line with

market expectations, and management

gave a reassuring message on cash flow

generation in 2020”, said Morgan Stanley.

However, with the statement lacking

detail on the assumptions underpinning

full-year guidance, the US travel ban from

Europe overshadowed the message.

Autogrill, the travel café operator, sank

after scrapping its dividend to reflect

coronavirus uncertainties and preserve

liquidity. The company said that by the

first week of March, Covid-19 had cut

group revenues by up to €30m, or 0.5 per

cent of last year’s total.

Aerospace engineersAirbus,Safran

andLeonardo ank on worries that thes

US restrictions had the potential to tip

their customers into bankruptcy.

Norwegian Air Shuttle as the sharpestw

faller among the airlines.

Atlantia, the airport and toll road

operator, led the Italian infrastructure

stocks lower after Rome announced

airport closures and capacity reductions.

Enel, the Rome-based energy utility, and

Post Italiene lso dropped.a

Potash producerK+S lid on as

darkening outlook for its planned disposal

of American salt mines.Bryce Elder

The FTSE 100 was hit by the second-

biggest drop on record, which left no

blue-chip stocks in positive territory as

the index sank 10.9 per cent.

The slump cut the index’s total

capitalisation by £160bn, the biggest

value loss in a single day.

Miners, leisure companies, insurers and

financial stocks all sunk bydouble digits.

Tui, the holiday company, dived

following a report that it was seeking to

cancel third-party contracts with Spanish

hoteliers ahead of summer season and

avoid paying pre-agreed deposits.

Ocado, the grocery deliverygroup, was

the best performing FTSE 100 member

on a fall of just 0.7 per cent while, in the

mid-caps,Equiniti, the financial services

outsourcing specialist, eked out a gain on

better than expected full-year results.

Cineworld ropped on an auditor’sd

warning that it would have to renegotiate

banking agreements if it missed two or

three months of total revenue.

Finablr ost nearly four-fifths of itsl

value after the currency exchange booth

operator said it was “taking urgent steps

to assess accurately its current liquidity

andcash flow position” following the

drop in airports traffic and the unravelling

of sister companyNMC Health.

Bryce Elder

3 W all Street tumbles after Trump’s
travel ban fails to allay virus fears
3 Vix volatility gauge hits highest level
since the financial crisis
3 Weak airline stocks weigh on European
and US benchmarks

A sell-off in global stocks intensified
yesterday after measures taken by
governments to fight the spread of the
coronavirus failed to quell market anxiety.
After US markets had closed on
Wednesday,Donald Trump announced a
ban on citizens from many European
countiesentering the US in a bid to
contain the contagion. But as he spoke,
US futures fell.
“The speech by Trump last night did
not inspire confidence,” said Brad Bechtel,
global head of FX at Jefferies.
Furthermore, “much of what the
president wants to do will require
congressional approval, and given we are
in an election cycle, that is likely to be a
rocky road.”
By the time Wall Street opened, the
S&P 500had fallen 8.1 per cent, putting it
on track to enter a bear market, defined
as a fall of 20 per cent from a recent high.
“The daily monster swings in markets
are becoming almost second nature at
the moment,” said Jim Reid, macro
strategist at Deutsche Bank. On Monday
the S&P 500 closed down more than
7 per cent, then rose almost 5 per cent
the following day, only to tumble

by the same margin on Wednesday.

Reflecting these swings, the Cboe Vix, a

gauge of implied volatility in the S&P 500

index, rose to almost 70 points, its

highest level since 2009.

On both sides of the Atlantic, airline

stocks were hit after Mr Trump’s

statement.United Airlines ell 16 per centf

while in EuropeAir France, easyJet nda

Lufthansa ll plummeted more thana

12 per cent.

The continent’s travel and leisure

stocks closed down 13 per cent,

underperforming the broader Stoxx

Europe 600 index, which fell 11.5 per cent

for its worst ever day’s trading.

In a further sign of market jitters,

investorswere in flight to haven assets

such as core government bonds, sending

the yield on the US Treasury down 10

basis points to 0.72 per cent.

Oil, which was already under pressure

due the new price war in the sector, sank

yesterday. Brent crude, the global

benchmark, nosedived more than 8 per

cent to $32 a barrel to stay near its lowest

level since 2016. WTI, the US marker, fell

6 per cent to $31 a barrel.Ray Douglas

What you need to know

Airline stocks slide after Trump announces travel ban

Stoxx Europe  Travel & Leisure index

Source: Bloomberg

















Mar 



Mar

The day in the markets

Markets update

US Eurozone Japan UK China Brazil
Stocks S&P 500 Eurofirst 300 Nikkei 225 FTSE100 Shanghai Comp Bovespa
Level 2525.17 1150.90 18559.63 5237.48 2923.49 70282.
% change on day -7.89 -11.53 -4.41 -10.87 -1.52 -17.
Currency $ index (DXY) $ per € Yen per $ $ per £ Rmb per $ Real per $
Level 96.982 1.108 105.680 1.254 6.985 4.
% change on day 0.492 -1.773 0.796 -2.715 0.506 3.
Govt. bonds 10-year Treasury 10-year Bund 10-year JGB 10-year Gilt 10-year bond 10-year bond
Yield 0.702 -0.748 -0.074 0.260 2.686 8.
Basis point change on day -13.510 -0.400 -0.610 -3.200 1.300 173.
World index, CommodsFTSE All-World Oil - Brent Oil - WTI Gold Silver Metals (LMEX)
Level 289.97 33.19 31.29 1653.75 17.02 2568.
% change on day -7.22 -7.26 -4.86 -0.12 -0.29 -0.
Yesterday's close apart from: Currencies = 16:00 GMT; S&P, Bovespa, All World, Oil = 17:00 GMT; Gold, Silver = London pm fix. Bond data supplied by Tullett Prebon.

Main equity markets

S&P 500 index Eurofirst 300 index FTSE 100 index

| |||||| ||||||||| ||||

Jan 2020 Mar

2240

2560

2880

3200

3520

| |||||||||||||||||||

Jan 2020 Mar

960

1280

1600

1920

| ||||| |||||||| ||||||

Jan 2020 Mar

5120

6400

7680

Biggest movers
% US Eurozone UK

Ups

Occidental Petroleum 7.

Cabot Oil & Gas 4.

Ipg Photonics -0.

Broadridge Fin Solutions -0.

Edwards Lifesciences -1.

Man -2.

Coloplast -2.

Colruyt -4.

Kone -4.

Schindler -4.

Nmc Health 0.
Ocado -0.
Spirax-sarco Eng -3.
Hikma Pharmaceuticals -5.
Pearson -5.
%

Downs

Norwegian Cruise Line Holdings Ltd -27.

Royal Caribbean Cruises Ltd -26.

Marathon Petroleum -25.

Loln National -23.

Ventas -22.

Prices taken at 17:00 GMT

Atlantia -22.

Renault -21.

Aegon -21.

Commerzbank -21.

Oci -21.

Based on the constituents of the FTSE Eurofirst 300 Eurozone

Anglo American -18.

Evraz -17.

Centrica -17.

Carnival -17.

Barclays -17.

All data provided by Morningstar unless otherwise noted.

T

he longest US stock market

bull run in history is now

over with the coronavirus

outbreak proving severe

enough to end 11 years of

almost unprecedented post-financial

crisisgains.

The Dow Jones Industrial Average

officiallyclosedinbearmarketterritory

— defined as a drop of over 20 per cent

fromthepeak—onWednesday.

Barring a miracle turnround, the

more important S&P 500 index of

America’s biggest listed companies was

duetodothesameyesterday.

All told, over $12.5tn has now been

lopped off the value of global equities in

less than a month. In all of 2008 when

the financial system nearly collapsed,

the global stock market lost about $18tn

of market capitalisation, according to

theFTSEAll-Worldindex.

Despite the recent slump, US equities

are still trading at about 15 times their

forecast earnings for the coming year,

compared with an average of around 16

over the past 10 years. Given that mar-

kets tend to overshoot on both the

upside and downside, a steeper decline

lookspossible.

The most recent step lower stems

from the World Health Organisation’s

announcement on Wednesday that it

now deems the coronavirus outbreak to

beaglobalpandemic.

President Donald Trump’s poorly

received televised address as alsoh

exacerbated the pressurebuilding on

marketsformorethantwoweeks.

The post-crisis bull market run has

faced many hurdles, all of which were

swiftly overcome. Between its low

almost exactly 11 years ago (it reached a

nadir of 666 points on March 6 2009)

and its peak on February 19 2020, it

handed investors a return of over 500

per cent. That made it the longest bull

runinhistoryandputitwithintouching

distanceofbeingthestrongest.

Europe’s debt crisis hreatened tot

plunge the global economy back into

recession in 2010-12 but eventually it

simmered down. In 2013, the end of the

US Federal Reserve’s bond-buying pro-

gramme caused a flare-up that threat-

ened developed world stocks but inves-

tors realised interest rates would prop

themupbystayinglowforalongtime.

China’s economic slowdown also

caused angst, most notably when

authorities let the country’s currency

depreciate in mid-2015 and the start of

2016. Markets went into a tailspin in
      February 2018 when several small
      volatility-tiedfundsimploded.
      The Fed’s gradual interest rate rises
      and rundown of its bond holdings then
      contributed to a bruising December,
      causing US stocks for the briefest of
      momentstodipintoabearmarket.
      But each time, investors shrugged off
      the setbacks, kept calm and “bought the
      dip” — a phrase that became such a
      mantra that it made it on to T-shirts,
      coffee mugs and a viral (by finance
      industrystandards)YouTubevideo.
      Today, almost no one is calm — the
      few investors that have cautiously tried
      tobuydipshavesufferedapummeling.
      “The new year started with such
      promise,” David Kostin, Goldman
      Sachs’ chief US equity strategist noted
      wistfully on Wednesday. But, given the

twin blows from the coronavirus and

collapsing oil prices, corporate earnings

were in recession and the bull market

wasfinished,hepredicted.

“Boththerealeconomyandthefinan-

cial economy are exhibiting acute signs

ofstress,”MrKostinsaid.Hehasslashed

his three-month forecast for the S&P

500 to 2,450, which would constitute

another 10 per cent drop from Wednes-

day’s closing level and a 28 per cent

collapsefromtheFebruarypeak.

Goldman’s short-term target would

put the S&P 500 back to the level of late

2018 and mid-2017, despite the likeli-

hood that the effects of the coronavirus,

the oil shock and financial markets in

turmoilwillbefar-reaching.

What does history indicate? Goldman

counted 27 bear markets since the

1800s in which the average decline has

been38percent.Ithasonaveragetaken

60 months to return to the previous

peak or 90 months in real, inflation-

adjustedterms.

Theaverage“event-driven”bearmar-

ket—alabelthatseemstofitthecurrent

situation — was a more modest 29 per

cent drop and has taken only 15 months

onaveragetoreclaimthepreviouspeak.

Central banks still have at least some

ammunition left and fiscal stimulus

looks certain to come. That may mean

markets snap back and start a new bull

runlaterthisyear,thebanksuggests.

However, this economic cycle was

already very long and, given how strong

markets have been over the past dec-

ade, it is very plausible that the slump

deepens. This bear market is unlikely to

find its nadir until the aftershocks of the

recent financial earthquake are over

and the extent of the economic impact

ofthecoronavirusbecomesclearer.

[email protected]

Coronavirus brings

record bull run

to a brutal end

‘Both the real economy

and the financial

economy are exhibiting

acute signs of stress’

MARCH 13 2020 Section:Markets Time: 12/3/2020- 18:34 User:stephen.smith Page Name:MARKETS2, Part,Page,Edition:EUR, 20, 1