Stocks in London fell 3% this morning and the FTSE 100 plunged as the coronavirus continued its spread outside of China.
In South Korea, where more than 230 new cases of the virus were confirmed over the weekend, the KOSPI index fell 3.9%. The won fell to its lowest value since August. In Europe, the London FTSE suffered its biggest fall since 2016, sliding more than 3%.
Italy and the Middle East also reported a large increase in confirmed infections of the disease. Industry commentators warned of long term market disruption.
The most worrying thing about the outbreak is that we have no idea how long it will last. That causes huge problems for firms that operate cross borders, such as airlines, or who rely heavily on global supply chains, such as manufacturers and healthcare companies."
Adam Vettese, an analyst at multi-asset investment platform eToro, said: "Investors are now waking up to the fact that the Coronavirus could become a global pandemic. The ‘out of sight out of mind' approach is now clearly no longer an option.
"The most worrying thing about the outbreak is that we have no idea how long it will last. That causes huge problems for firms that operate cross borders, such as airlines, or who rely heavily on global supply chains, such as manufacturers and healthcare companies.
"Unless governments can get a grip on the outbreak - and fast - it could be the most disruptive thing to hit markets in many years. That will almost certainly see investors nursing big losses."
Chris Towner, director at Chatham Financial, said: "The pace of the spread of infections of the coronavirus outside of China has caused the financial markets to drop dramatically today with the FTSE falling over 3%. This renewed fear is due to the spread of the virus outside of China with South Korea and Italy being the latest countries to report a surge in people infected.
"This latest news has caused markets to start to price in the risk that the coronavirus reaches a point where new infections no longer come from Chinese nationals. It makes the virus far harder to contain and if the spread continues more broadly across the globe then trade and travel are bound to be further impacted. It is clear now that 1Q global growth will be impacted by the spread of the virus especially in China where small to medium sized businesses are strapped for cash amid the obligation to carry on paying staff.
"So, the questions being asked now are how much further can this virus spread? Also, how quickly can a cure be found? There is hope that we are now through the deepest and darkest of winter and warmer temperatures may help to restrict the spread. However, we are clearly not yet out of the woods and for now financial markets will remain on edge."
Adrian Lowcock, head of personal investing at Willis Owen, an investment platform in the UK said: "The spread of the coronavirus outside of China has a potentially serious impact on people, the economy and markets. The situation could escalate rapidly and if other countries follow China's lead of putting cities on lockdown then the disruption to the global economy and fragile economic growth could be severe. The uncertainty that the outbreak creates is causing many investors to sell first as they don't want to take the risk that things could get significantly worse."
By contrast, Nigel Green, CEO of deVere Group, argued the markets are likely to recover: "Global financial markets retreated on Monday as they reacted to the coronavirus headlines over the weekend. But it is likely that they will quickly rebound, as they have consistently done in recent weeks.
"This is because many investors remain complacent about the far-reaching impact of coronavirus, which is continuing to spread - and a faster pace. This will inevitably hit financial markets and investors' complacency leaves many wide open to nasty surprises."
Helen Bradshaw, a portfolio manager with Quilter Investors, believes investors would be mistaken to think this is a fool proof way of investing for income. "A decade of ultra-low interest rates has pushed bond yields off a cliff and resulted in a forced migration by income investors into more volatile equities," Bradshaw said. "Although equity dividend levels in the UK have held up well, it is a mistake to assume they are immune from volatility.
"Thanks to different accounting periods and special dividends there's little rhyme or reason to when companies in the same index choose to pay their dividends. This is especially true for the FTSE 100, where not only are dividends lumpy, but there are other issues to be aware of such as the concentration of dividends to just a handful of companies, as well as dividend cover.