FTSE could hit 5,000, warns hedge fund boss Crispin Odey as coronavirus spooks City
- Odey said the disruption to the economy could lead to further dips in shares
- He said levels closer to 5,000 points looked ‘highly probable’
- Retailers say high street shelves may soon be left empty if Chinese factories remain closed for much longer
Hedge fund boss Crispin Odey has warned the spread of coronavirus could trigger more economic shocks as City firms go into lockdown this week.
Banks are understood to be banning large meetings and non-essential foreign travel, while some have already sent home staff who have links to affected parts of the world.
Meanwhile, retailers say high street shelves may soon be left empty if Chinese factories – which supply a third of the UK’s clothing, home and electronics goods – remain closed for much longer.
Hedge fund boss Crispin Odey frequently bets on the stock market falling
Odey, who frequently bets on the stock market falling, said the disruption to the economy could lead to further dips in share prices – 11.1 per cent was wiped off the FTSE 100 last week.
‘The whole global growth story has come shuddering to a halt,’ he told The Mail on Sunday. ‘We could be heading for the first proper deep recession since 1989, when everything stopped. There would have been a recession in 2008 but central banks cut rates which boosted consumer incomes.
‘The situation with coronavirus is an event central banks can’t really do anything about as interest rates are already very low. It’s out of their control.’
When asked how far he thought the stock market could fall, Odey said levels closer to 5,000 points looked ‘highly probable’.
‘The market is full of bulls and bears – the bulls have had their time and now the bears have arrived.’
Mohamed El-Erian, chief economic adviser at insurer Allianz, said the fall in stocks had been ‘turbocharged’ be-cause companies were already guilty of taking too many risks that were not reflected in their share prices.
Investors had ‘stretched too far and wide in search for returns in a very low interest rate world’, he added.
City firms are now bringing in stricter rules to contain the spread of the virus among employees.
Credit Suisse has said there should be no employee gatherings over 250 people off-site and non-essential travel has been banned
Credit Suisse has said there should be no employee gatherings over 250 people off-site and non-essential travel has been banned.
Goldman Sachs is restricting all business travel to, from and within mainland China, South Korea and the Lombardy and Veneto regions in Italy. All non-essential business travel to the rest of Italy has been postponed except where specific approval from divisional chief operating officers is granted. And at least one bank is understood to have sent home Italian staff from its London office.
Amid growing concern about how the lockdown in China may hit trade, the boss of one major retail firm said: ‘Remember Chinese factories not only produce a third of the clothing, home and electronics products you buy on the high street. A lot of the fabrics and other components that are shipped to Bangladesh, India, Vietnam or Turkey are made in China.
‘This could get pretty bad in terms of products coming out of there and at the moment everybody is trying to find other countries to supply from.
‘But you are only ever going to be able to do that in a limited way. It’s not a disaster yet, but the longer this goes on, every week that goes by, it could well become one.’
It takes six weeks for products to ship from China by sea freight.
The executive added: ‘The situation is fluid so things might not develop that way. Even if it does, you might not get empty shelves – as you can spread products out in most clothing shops to cover that. But you are going to see choice becoming more limited as the weeks go by.’