By Sagarika Jaisinghani and Devik Jain
(Reuters) - London's stock markets tanked on Friday, with both benchmark indexes firmly entering correction territory, as the coronavirus outbreak threatened to turn into a pandemic and spark a global recession.
British Airways-owner IAG (L:ICAG) tumbled to a four-month low after the airline said it would cut flights to Italy, Singapore and South Korea, reflecting a collapse in passenger numbers.
IAG's 9.2% fall pushed the stock to the bottom of the FTSE 100 and led the wider travel and leisure index (FTNMX5750) down 4.7% to its lowest level since 2016.
The blue-chip FTSE 100 (FTSE) fell 3.5%, while the mid-cap index (FTMC) shed 3.9%. Both baskets were on track for their worst week since the 2008 financial crisis.
World stocks have been hammered across the board this week, with the MSCI world index (MIWD00000PUS) losing nearly $5 trillion in value, as widespread disruptions to the supply chain prompted analysts to cut their forecasts for economic growth and corporate earnings in 2020.
On Friday, Citigroup (NYSE:C) predicted the corporate sector would see no earnings growth at all this year, while ratings agency Moody's said a pandemic would trigger a global recession in the first half of the year.
"It really does look like we have further tough times ahead of us, growth wise," said Chris Beauchamp, chief market analyst at IG.
"We can expect further weakness across Asia and this will rebound to UK markets."
Bank of England chief Mark Carney said in a Sky News interview on Thursday night that it was likely the economy would take a hit. Traders are counting on the U.S. Federal Reserve to cut interest rates next month to prop up growth.
London's main index has lost about 13% from a peak hit on Feb. 12, as the virus continues to spread unchecked outside China, the epicentre of the outbreak.
Countries on three continents have now reported new cases, while in Europe confirmed infections in Italy reached 650 and Germany warned of an impending epidemic.
British aerospace engineer Rolls-Royce (L:RR) was the only stock in the black on the main index, rising 3.7% as its chief executive said the company was looking forward to 2020 with some degree of conviction and confidence.
The comments helped offset disappointing 2019 results from the company.
Biotechnology firm Novacyt (L:NCYT) soared 19.6% after signing its first major distribution agreement to supply its coronavirus test to two Asian territories outside mainland China.
Real estate agent Foxtons (L:FOXT) slipped 3.6% as its annual adjusted core profit plunged.