Friday 27 March 2020 4:57 pm

FTSE 100 falls as coronavirus stimulus rally runs out of steam

Britain’s FTSE 100 stock index tumbled today after three consecutive days of gains as uncertainty about the effects of coronavirus returned to the fore.

The FTSE 100 closed 5.3 per cent lower at 5,510 points. It had risen more than 16 per cent over the previous three days after the US launched a $2 trillion (£1.7 trillion) stimulus package.

Read more: Self-employed coronavirus stimulus: Rishi Sunak to pay Britain’s freelancers up to £2,500 a month

Prime Minister Boris Johnson’s announcement that he has coronavirus made the sell-off mildly worse.

The FTSE 100’s European counterparts also fell. The continent-wide Stoxx 600 shed 3.3 per cent and Germany’s Dax was 3.7 per cent lower. France’s CAC dropped 4.2 per cent.

US stocks followed the downwards trend, with the S&P 500 index down 2.8 per cent. The Dow Jones was three per cent lower and the Nasdaq had fallen 2.9 per cent.

It was a different story yesterday, when investors shrugged off the dire jobs numbers and chose to focus on the huge stimulus bill passed by Congress.

Overnight, Japan’s Nikkei index rose 3.9 per cent, China’s SSE rose 0.3 per cent, and Hong Kong’s Hang Seng climbed 0.4 per cent.

Read more: Next suspends online shopping amid UK coronavirus outbreak

That rally fizzled out in the FTSE 100 and European indices today, however. Jim Reid at Deutsche Bank said rising US jobless claims “are the single best real-time indicator of recession”.

The US saw a 3.3m rise in unemployment benefits claims last week. “We cannot stress enough how unprecedented numbers like this in a single week are,” Reid said. “Even in the financial crisis, the peak week in March 2009 was at 665,000.” 

FTSE 100 investors fear the weekend

The US last night also became the epicentre of the coronavirus outbreak, with its number of cases surpassing China’s.

Jasper Lawler of London Capital Group said the number of cases in the US and deaths in Italy “lead us to fear the lockdowns in the West will extend beyond Easter, making the existing government support not be enough”.

Read more: Number of coronavirus cases in US overtake Italy and China

Craig Erlam, senior market analyst at currency trading platform Oanda, said: “Rallies don’t last forever.”

He said investors “are happy to call time on this one as we head into another uncertain weekend”.

Erlam said Mondays have not been good for markets in recent weeks, “producing an average decline of 5.16 per cent in the FTSE 100”. He added: “The weekend can feel like a long time at moments like this.”

The FTSE 100’s biggest faller was multinational cruise line operator Carnival. Its shares plunged 20.5 per cent to 981.6p over fears that it may not be able to claim US stimulus money because it is registered in Panama.

UK retailer Next’s shares also slumped after it announced it will suspend online retailing amid the coronavirus outbreak. It fell 11.1 per cent to 4,008p.

Shares in Paddy Power and Betfair-owner Flutter also tumbled after it suspended its 2020 dividend. It dropped 11.6 per cent to 6,548p.

Read more: FTSE 100 rises on $2 trillion US coronavirus stimulus

The surge in US jobless claims has caused the dollar – which has been riding high on the current wave of uncertainty – to slip back slightly. The pound was 2.2 per cent higher against the dollar at $1.241.

Brent crude oil, which has fallen dramatically in recent weeks, was 3.6 per cent lower at $27.61 per barrel.