FTSE drops 2.3% as Covid surge jeopardizes global recovery
Update: The FTSE 100 fell on Thursday amid growing concern over the sustainability of the global economic recovery as cases of Covid-19 rise, sales ramping up throughout the day as US markets were also opening sharply down.
The UK blue chip index fell 164 points, or 2.3%, to 6,987 by mid-afternoon with just two stocks in positive territory as concerns also mounted over a possible tightening of monetary policy in the USA.
“The bond market seems to be telling us that the reflation trade is dead or dying, with the US 10-year yield falling to its lowest level since mid-February, down more than 10 basis points from at the close of last week, while the stock markets are also under pressure due to concern over the slowing global recovery as infection rates continue to rise, ”said Michael Hewson, analyst in chief at CMC Markets.
“This is quite a different story than the one that predicted that reflationary trading of rising yields could put downward pressure on some of the more expensive areas of the stock market. It almost seems old news now, as investors find something else to fear.
A weak open on Wall Street in the US fueled the fire, with the S&P 500 slipping 64 points, or 1.4%, to 4,296 early in the session.
(09:56) FTSE tumbles 1.3% on tightening fears
The FTSE 100 suffered a widespread sell-off following the US Federal Reserve’s minutes that raised concerns about a gradual reduction in fiscal stimulus.
The main index fell 1.3%, or 96 points, down to 7,054 as the minutes of the last Fed meeting showed that a debate had begun on withdrawing support for the. US economy as inflation continues to soar.
This has raised concerns among investors that the central bank will be forced to raise interest rates and cut bond purchases sooner than expected.
Although members of the US central bank committee voted in favor of keeping the key rate, the Fed warned that a “substantial majority” believed the risks to inflation projections were “tilted up.” .
Miners were the biggest losers as oil prices fell, with Opec and the United Arab Emirates failing to come to an agreement on production flows.
Neil Wilson, analyst at Markets.com, said the UAE has reported that it “can turn on the taps to pump at will.”
“The fear is that the supply agreement will collapse, accumulating more crude in the market,” he said. “West Texas Intermediate held at $ 73 the first time around, but cracked on the second attempt and quickly declined and found support at $ 71. We can expect another test at this level.
Antofagasta (ANTO) fell to the bottom of the index, losing 3.3%, or 48p, to trade at £ 13.91, and it was followed by:
- Anglo-American (AAL) down 3.3%, or 99p, to £ 28.92;
- Rio Tinto (RIO) down 2.7%, or 163p, to £ 58.75;
- Evraz (EVRZ) down 2.7%, or 16p, 584p;
- Glencore (GLEN) down 2.3%, or 7p, to 310p; and
- BHP (BHP) down 2.1%, or 48p, to £ 21.53.
AJ Bell analyst Russ Mold said the miners’ crisis suggested that “investors have started to worry again about the strength of the economic recovery.”
“The fortunes of miners are strongly linked to the prices of raw materials and the cost of metals and minerals is generally determined by the supply and demand of industrial projects around the world,” he said.
The main market liquidation left only a handful of stocks on the rise, one of which was Entain (ENT), which climbed 1.9%, or 34p, to £ 18.42. The games group saw an 11% increase in gaming revenue in the first half of the year thanks to a rebound in retail sales.
Hargreaves Lansdown analyst Sophie Lund-Yates said the England football team’s semi-final victory last night will be “a double cause for celebration” for Entain, because “a final appearance is an open objective for the group and will be a boon for sports betting ”.
The more domestically focused FTSE 250 index fared better, but even the fact that the English football team are heading towards the Euro 2020 final was not enough to keep them out of the red.
Mid caps fell 0.8%, or 182 points, to trade at 22,787, dragged lower by the fluid storage engineer IT fluid systems (TIFS), which fell 6.8%, or 21p, to 293p. Commodity trading and mining company Ferrexpo (FXPO) lost 3.5%, or 15p, to change hands at 419p, while Telecom Plus (TEP) lost 3.5%, or 42p, to trade at £ 11.48.
In the news of investment funds, International Pantheon (PIN) rose 0.7% to £ 28.15 as it announced a 2.9% increase in its net asset value in May. The private equity fund portfolio invested £ 46.9m in three funds during the month and four co-investments, including a European growth equity fund and a North American buyout fund.