On Friday investors dumped equities in expectation of a global recession as share prices saw the worst week since the global financial crisis in 2008.
The coronavirus has disrupted international travel and supply chains as three more continents have reported cases of the virus, which is fuelling fears of a recession in the Euro Zone and the US.
On Wall Street Asian stocks tracked a plunge where the benchmark S&P 500 index fell more than 4% on Thursday.
On Thursday the US Dow Jones suffered the largest one day drop in history, falling by almost 1,200 points.
This week the collapse in the global stock market was valued at $5trn, whilst ahead of Friday’s session, the UK FTSE 100 companies have contributed £152bn.
The French and German markets were both down by 4%.
Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities said, “The coronavirus now looks like a pandemic.
“Markets can cope even if there is big risk as long as we can see the end of the tunnel.
“But at the moment, no one can tell how long this will last and how severe it will get.”
UK shares plummeted at the open on Friday, as the global market sell-off shows no sign of slowing up.
Shortly after opening, the FTSE 100 index was down 224.14 points, or 3.3%, at 6,572.26.
The FTSE 250 index fell 527.74 points, or 2.7%, to 19,255.71.
Justin Urquhart Stewart, co-founder of Seven Investment Management, explained the psychology behind why markets are so volatile.
He told BBC Radio 5 Live’s Wake Up to Money programme, “When things build up like this, you can’t see the future, you’re going to get volatility.
He explained that the key thing is confidence, and when that goes down, people stop investing and decisions are held up.”
“We saw that throughout most of last year because of the Brexit charade we had to go through, and [the coronavirus outbreak] has just added to it,” he added.
“This dissipates that confidence and therefore that’s why the markets are going down. Then what you find is that people get really frightened and start selling out, which is probably the worst thing they can do.”
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “It is important for investors to understand that the actual sell-off is amplified by a general panic.
“This is the worst week since 2008 and the paranoia grows.”
But Ozkardeskaya added, “To us, it appears that the market has gone ahead of itself and a rebound should be around the corner.
“The coronavirus outbreak has certainly hit businesses, and it might have a longer-than-expected negative impact on company earnings and global growth.
“Yet the extension of the sell-off we are seeing may be a bit too dramatic, even compared with the significant downshift in valuations.
“Market calamity will certainly leave its place to recovery at some point.”