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Dow Jones plunges 1,000 points on coronavirus fears

<span>Photograph: WPA Pool/Getty Images</span>
Photograph: WPA Pool/Getty Images

The Dow Jones has plunged by 1,000 points for the second day in a row, with the FTSE losing more than 300 points by mid afternoon, as stock market losses linked to this week’s coronavirus escalation smashed through $5tn (£3.83tn).

As share prices nosedived, the Bank of England governor warned of a slowdown in the UK, major airlines slashed routes and the Geneva motor show was cancelled.

A day after Wall Street suffered its biggest one-day slump on record, shedding 1,190 points in a day, the Dow Jones industrial average went into freefall again, losing just over 1,000 points in early trading, or 4%.

The FTSE 100 in London, which had fallen before Wall Street opened, retreated even further, losing 4.8%. The blue-chip index is on course, along with European markets, for the worst week since the financial crisis in 2008.

Reuters calculated that global investors have lost $5tn since Monday as markets priced in the threat of a global recession.

Related: Geneva motor show cancelled; worst week for markets since 2008 – business live

Oil-rich countries are considering deep production cuts, according to reports, reflecting the expected impact on global economic activity. The Geneva motor show became the latest major international business event to be cancelled after the Swiss government imposed a ban on gatherings of more than 1,000 people. In the UK, the law firm Baker McKenzie shut its London office and sent more than 1,000 staff home after a possible coronavirus case was detected.

Following warnings from economic analysts that the virus could take a toll akin to the 2008 financial crisis, the Bank of England governor, Mark Carney, cautioned on Thursday that UK growth could be hindered by the drag effect the outbreak was having on global trade.

“We would expect world growth would be lower than it otherwise would be, and that has a knock-on effect on the UK,” said Carney, who is due to hand over leadership of the Bank to Andrew Bailey on 15 March. “We’re not picking that up yet at all in the European and UK economic indicators but if the world is slower than the UK, a very open economy, will have an impact.”

The World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the Wuhan coronavirus, for which there is no specific cure or vaccine.

The UN agency advises people to:

  • Frequently wash their hands with an alcohol-based hand rub or warm water and soap

  • Cover their mouth and nose with a flexed elbow or tissue when sneezing or coughing

  • Avoid close contact with anyone who has a fever or cough

  • Seek early medical help if they have a fever, cough and difficulty breathing, and share their travel history with healthcare providers

  • Avoid direct, unprotected contact with live animals and surfaces in contact with animals when visiting live markets in affected areas

  • Avoid eating raw or undercooked animal products and exercise care when handling raw meat, milk or animal organs to avoid cross-contamination with uncooked foods.

Despite a surge in sales of face masks in the aftermath of the outbreak of the coronavirus outbreak, experts are divided over whether they can prevent transmission and infection. There is some evidence to suggest that masks can help prevent hand-to-mouth transmissions, given the large number of times people touch their faces. The consensus appears to be that wearing a mask can limit – but not eliminate – the risks, provided they are used correctly.

Justin McCurry

Carney told Sky News: “Things are getting tight,” adding that while it was impossible to be precise about the severity or the duration of the effect, “the direction is down”.

He said: “We’re not out of the woods. There’s less tourism – as you can see on our streets here in the UK. That’s lower activity as well.”

With economic growth at risk, the Opec group of oil-producing nations is expected to discuss increasing planned production cuts at a meeting in Vienna next week.

Oil prices reached a 13-month low this week and any slowdown in economic activity would weigh even heavier on prices, adding to pressure to cut output to balance supply and demand.

Saudi Arabia, the largest producer, is expected to discuss with fellow Opec members such as Iran and Iraq whether plans to cut production should be ramped up from 600,000 barrels per day to 1m.

The Geneva motor show organisers said Geneva’s economy could lose €250m (£213m) this year owing to the cancellation of a show that typically attracts as many as 600,000 executives and car fans. It was due to take place from 2-15 March but all ticket-holders will now be refunded.

The combined value of companies listed on stock markets around the world has plunged by $6tn since the Covid-19 outbreak began in January, in the city of Wuhan in China’s Hubei province.

The FTSE shed more than 3% for the second consecutive day on Friday, taking its combined losses to £200bn since Monday. The index and its European counterparts are on course for their worst week since the 2008 financial crisis.

Shares in the no-frills airline easyJet and IAG, the owner of British Airways, have been particularly badly hit because of the effect on global travel. Both reported significant drops in demand and announced emergency measures on Friday, including cancelling flights, changing the size of planes used on routes and freezing pay.

The Vix index, which measures stock market volatility, hit one of its highest levels since the 2008 financial crisis.

The Dow Jones industrial average suffered a record one-day fall on Thursday – 1,190 points – losing 4.4%, as fears of a global pandemic shook confidence on Wall Street. The index is expected to suffer further falls when it opens on Friday.

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