FTSE 100 up 2% as markets recover from coronavirus panic
THE FTSE 100 has risen two per cent this morning as markets begin to recover from coronavirus panic.
Last Friday saw the index fall by more than four per cent, reaching the lowest level since the EU referendum results in 2016.
Panicked trading meant the market tumbled as investors grew concerned about a potential recession in Europe.
The reason markets were worried is because companies are struggling with the business impact of coronavirus.
Airlines are having to cancel flights, insurers are facing hefty bills as governments rule out travel and even companies such as Apple and Microsoft are expect to suffer from supply chain issues.
Because the indices like the S&P, FTSE 100, FTSE 250 and Dow Jones are tracking the share price of big companies, when the market worries about how those organisations will fare, the share prices fall.
If the market is reassured again, share prices start to climb slowly back up.
And today the markets have rallied slightly, with the FTSE 100 up 2.16 per cent this morning.
The confidence is partly driven by reports that policymakers will take measures to ease the economic impacts of the coronavirus outbreak.
Bank of England governor Mark Carney has said policymakers stand ready to help businesses and households through an economic shock caused by coronavirus that could "prove large but will ultimately be temporary".
But experts are warning that we can expect more volatility in share prices as news and updates about coronavirus come to light.
For instance markets may fall if the virus spreads further, but may rise if governments announce plans to deal with the crisis. To follow the latest updates - follow our live blog.
Laura Suter, personal finance analyst at investment platform AJ Bell said: “A second day of gains on... the FTSE 100, after last week’s large falls will be welcome relief for investors but the rebound only makes up a small fraction of the losses experienced last week.
“The UK stock market rally followed a very impressive rise on Wall Street yesterday where the main index, the S&P 500, jumped 4.6 per cent.
“Markets have been buoyed by growing optimism that authorities around the world will intervene in an attempt to counter the economic threat from coronavirus.
"However, it is clear that the outbreak is far from over and no one really knows how it is going to play out or how wide reaching the impact will be.
“There is likely to be further volatility in markets in the weeks ahead as the world struggles to contain the virus and investors react to the impact it has on companies and the economy."
How will the FTSE 100 volatility affect me?
The FTSE 100 is an index that tracks the share price of the UK's 100 biggest companies.
When it falls, it's usually seen as a bad day for investors, and when it goes up, investors make money.
Many savers are impacted because they have pensions or ISAs that are invested in stocks and shares.
But the good news is that unless you're planning to withdraw money immediately, these ups and downs are unlikely to matter.
Because investments are usually long-term, investors can ride out the drops and look to take out their money when markets are up.
And last week's market drop - the third worst in history - is already starting to ease.
This morning's two per cent rise hasn't undone all the damage, but it is a sign that investors are gaining in confidence.
If you have investments the best thing to do is wait, shares should recover over the medium term.
Hargreaves Lansdown's Danny Cox said: "You should not be overly concerned – don’t panic - if you are saving regularly into your pension or ISA you should keep going.
"In fact on a buy low sell high basis, investing today is at a cheaper, and therefore better price, than a month ago."
What's happening in other markets?
It's not just the FTSE 100 that suffered losses last week.
In the US the Dow Jones plummeted over 500 points and the S&P 500 fell 2.28 per cent.
Tokyo’s Nikkei225 index fell by 3.6 per cent, while in Indonesia, Jakarta’s JKSE fell four percent overnight.
Shanghai, Seoul, Bangkok, and Sydney all lost more than three percent.
But today all the markets are looking brighter.
The Dow Jones is up 5.09 per cent this morning, while the S&P 500 rose 4.60 per cent.
Although the Nikkei 225 index in Tokyo is still down by 1.22 per cent.
Cox said: "It’s a nervous time in the markets and we are going to see days of ups and downs until the extent and impact of the Coronavirus outbreak is clearer.
"Markets tend to follow each other and the recovery we saw in the US yesterday has boosted the UK FTSE this morning.
"The longer this goes on for, the lower investor confidence will fall.
"However, people should not be overly concerned as these stockmarket ups and downs are perfectly normal and long term investment will pay off."
Policymakers in the US introduce emergency rate slash to protect economy
In America policymakers have taken the decision to slash interest rates by half a per cent to fight the economic impacts of Coronavirus.
The emergency measures came as an unexpected shock, but will reassure markets in the States.
This is the fourth time the Federal Reserve System has cut rates since last June.
The Fed said: "The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity.
"In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by half a percentage point, to 1 to 1.25 per cent.
"The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy."
Cutting rates is another tool available to Mark Carney and the Bank of England if they decide it is necessary to protect the UK economy.
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