March 16, 2020 / 5:47 PM / 20 days ago

UPDATE 2-London stocks plunge as airlines gasp for survival amid coronavirus

* FTSE 100 down 4%, FTSE 250 fell 7.8%

* UK stocks hit lowest level since Oct 2011

* More pain for airlines as virus hits travel

* Finablr CEO to step down (Adds comments, updates to close)

By Shivani Kumaresan and Devik Jain

March 16 (Reuters) - UK shares plunged on Monday as airlines announced flight cuts and stepped up calls for emergency aid to get through the coronavirus outbreak.

London’s blue-chip FTSE 100 index dropped 4% to its lowest since October 2011, adding to a 17% slide last week, while the broader European STOXX 600 index was down 4.9%.

A volatility gauge for eurozone stocks, commonly known as the fear gauge, jumped to an all-time high of 95.02 points.

Britain’s airline stocks took the biggest hit after two of the largest airlines in Europe, British Airways and easyJet, warned of aircraft groundings on an unprecedented scale as the coronavirus pandemic took a heavy toll on operations.

ICAG, the owner of British Airways, slid 27% after saying it would cut its flying capacity by at least 75% in April and May. Shares of EasyJet and TUI AG slumped 19.3% and 12.7%, respectively

“The sector has a reputation for being heavily indebted and a poor track record for seeing through crises. We’ve already seen Flybe go into administration and we will no doubt see more airlines fail,” Russ Mould, investment director at AJ Bell, said.

“Shareholders can wave goodbye to any dividends and airlines certainly won’t be buying back shares in the current environment.”

London’s travel and leisure index was down for the ninth consecutive session. It fell 13.1% while the domestically focused FTSE 250 dropped 7.8%

Shares in Holiday Inn-owner InterContinental have plunged 43% this year, while those in fellow London-listed operator, Premier Inn-owner Whitbread, are down more than 50%.

Hoping to improve liquidity and ease strains on global funding markets, the U.S Federal Reserve cut its interest rates to near zero on Sunday. The International Monetary Fund chief has called for a coordinated fiscal stimulus to limit the damage.

“The price of money in the end is irrelevant if risk appetite remains as low as ... current levels,” said Stefan Koopman, Senior Market Economist at Rabobank.

The only way the risk appetite would be bolstered was if there were “clear scientific signs” that the virus was under control, he said.

The number of deaths of Britons with coronavirus jumped by 14 in the last 24 hours to 35, while the total diagnosed rose by 20% to 1,372, health authorities said on Sunday.

Adding to slowdown fears, a survey showed manufacturing in Britain weakened sharply in early 2020 even before concerns about the coronavirus crisis escalated, adding urgency to the need for a trade deal with the European Union.

Feeling the heat from lower rates, shares in major lenders including Barclays, Lloyds Banking Group fell 13% and 7.3%.

Insurers such as Admiral, Aviva, Direct Line and Prudential Plc slumped on a sharp rise in claims because of the economic fallout from the coronavirus pandemic.

Among other virus casualties, luxury carmaker Aston Martin tumbled 30.2% to an all-time low after it said it was increasing a 500-million pound ($617 million) capital-raising plan by 36 million pounds.

Retail chain Primark’s owner, Associated British Foods , said it had shut 20% of its store space and would not provide a full-year forecast due to the impact of the pandemic.

Payments group Finablr fell 9.9% after it said its CEO would step down, with the company finding it difficult to survive following problems in its Travelex business,hit by a ransomware attack last year. (Reporting by Shivani Kumaresan and Devik Jain in Bengaluru; Additional reporting by Sruthi Shankar, Editing by Timothy Heritage)

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