London pre-open: Stocks to slump after Asian losses as Fed slashes rates

London stocks were set to tumble at the open on Monday following heavy losses in Asia, after the Federal Reserve slashed rates to near zero.

The FTSE 100 was called to open 166 points lower at 5,200.

Overnight, the Fed cut interest rates to between 0.00% and 0.25% and announced the launch of a $700bn stimulus programme to help counter the impact of the coronavirus pandemic.

The Fed said in a statement: "The coronavirus outbreak has harmed communities and disrupted economic activity in many countries, including the United States.

"The effects of the coronavirus will weigh on economic activity in the near-term and pose risks to the economic outlook.

The Fed also launched a dollar-swap plan in coordination with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank, to boost liquidity in the US dollar.

The move sent Asian markets lower.

CMC Markets analyst David Madden said: "This co-ordinated move by central banks serves to underscore the seriousness of the economic shocks coming our way, however they could well miss their mark unless politicians step up as well, especially in Europe, where the risks are the highest and the financial system is the weakest.

"The bigger question now being asked is how much further do these declines have to go in the wake of the prospect that we’re on the cusp of coming to a juddering halt for the global economy. This in turn will plunge most of the global economy into a sharp recession.

"Barely a month ago, markets across the globe were trading at, or within record or multi year highs, on misplaced optimism that this outbreak might be contained. Now here we are a month later, and it’s hard to envisage how we might get back anywhere close to these levels.

"Any optimism and complacency that we may be able to ride out a short economic shock has all but disappeared, with the reality that a wholesale shutdown of passenger air travel, and a lockdown of populations could see large scale business failures as companies that rely on consumer discretionary spending start to hit cash flow problems, resulting in wholesale job losses."

In corporate news, easyJet said government backing would be needed to save the European airline industry from the impact of the coronavirus as it warned it may have to ground a majority of its fleet.

The budget carrier said it had made further significant cancellations as European countries moved into lockdown, adding that these would “continue on a rolling basis for the foreseeable future”.

EasyJet said it maintained a strong balance sheet including a £1.6bn cash balance, an undrawn $500m revolving credit facility, unencumbered aircraft worth in excess of £4bn and a “large and valuable slot portfolio” with no debt re-financings due until 2022.

Primark owner AB Foods said it had seen an accelerated decline in sales in its European stores as they were either closed or customers stayed away due to the coronavirus despite an improvement in supplies from China.

"European aviation faces a precarious future and there is no guarantee that the European airlines, along with all the benefits it brings for people, the economy and business, will survive what could be a long-term travel freeze and the risks of a slow recovery," the company said.