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Pound at 35-year low as markets react to ‘magnitude of pandemic’

Global stock markets have hit reverse again while the pound is at its lowest level against the dollar in 35 years as investors flee ever deepening gloom over the coronavirus crisis.

The FTSE 100 plunged by just over 4% on Wednesday to 5,080 points – wiping out strong gains seen the day before – despite “unprecedented” measures announced by chancellor Rishi Sunak to help businesses and households weather the storm.

Markets had been lifted on Tuesday by the promise of stimulus measures, with New York’s Dow Jones climbing more than 5% after US President Donald Trump unveiled plans for an $ 850bn stimulus package, including help for airlines.

But it took less than 24 hours for the enthusiasm to fade, with Asian markets falling again overnight and the US and European indices following, firmly in the red.

EasyJet was among the big FTSE fallers in London – losing 17% as airline stocks continued to bear the brunt of the losses as travel shuts down.

Sky News has learned that the no-frills carrier has entered talks with unions on a package of measures that could see staff forced to take three months of unpaid leave over a six-month period.

A group of other UK-listed firms issued profit warnings.

The Dow had bled more than 2,000 points – almost 10% – by the afternoon but recovered some of those losses late in the session to close 6.3% down.

Values crashed below pre-Trump presidency levels after US treasury secretary Stephen Mnuchin said parts of the US economy would have to be shut down to “destroy” the virus.

Analysts from London Capital Group said that the “magnitude of the pandemic is outweighing stimulus hopes”.

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A slew of other markets were also in turmoil.

Brent crude oil was trading at a 16-year low of $ 26 dollars a barrel.

But the pound was having a particularly difficult time – down 2.5% against the euro and more than 4% against the US dollar at one stage, meaning that a pound bought €1.07 and $ 1.15.

Neil Wilson at markets.com said the decline in sterling was “one of the steepest in memory”, leaving it at its weakest level since 1985.

He added: “This is the worst sustained period of sterling selling that I can recall, and it points to a severe dollar liquidity crunch that central banks have yet to get a grip on. There is a synchronised rush for dollars that has caught most companies, governments and traders on the hop. Dollar funding issues have been far more serious than estimated prior to this crisis.”

AJ Bell investment director Russ Mould said: “Ultimately no amount of cash or measures to mitigate the economic impact of the crash can tell investors what they want to know right now, which is when daily life will return to normal (or even a new normal).”

Growing numbers of factories across Europe and the US are closing down – following the lead set by China at the beginning of the year as it coped with the early spread of coronavirus.

The global economy is, according to many economists, almost certain to be already in recession given the scale of the disruption.

Traders work on the floor of the New York Stock Exchange (NYSE) on March 17, 2020 in New York City
Image: The US markets close later today following falls in Asia and Europe

COVID-19, the illness caused by the coronavirus, has infected more than 207,000 people and killed more than 8,200 to date, including 104 in the UK.

A decision to close UK schools from Friday evening, except for the children of key public workers and those deemed vulnerable, will put greater pressure on the economy as parents are forced away from their work.

Matthew Fell, the CBI’s chief UK policy director, said: “Businesses will do all they can to help their employees in these unprecedented times.

“Companies will make every effort to offer flexible working, but many parents simply won’t be able to do their jobs and care for their children at the same time.

“With so many businesses already struggling with cashflow, government will urgently need to step in with additional support to employees who are unable to work because of school closures.”

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