The FTSE 100 has fallen in early trading after two consecutive days of gains as investors await what is set to be dire US jobs data and an interest rate decision by the Bank of England.
Britain’s main stock index was down 2.8 per cent at 5,530 points. It had climbed five per cent yesterday after soaring the day before on the back of huge stimulus from the US’s government and central bank.
The FTSE 100’s European counterparts also opened lower. The continent-wide Stoxx 600 fell 1.8 per cent, Germany’s Dax index was down 2.2 per cent, and France’s CAC 40 dropped 2.3 per cent.
Asian markets fell overnight. Japan’s Nikkei 225 index dropped 4.5 per cent, Hong Kong’s Hang Seng shed 0.9 per cent, while China’s SSE slipped 0.6 per cent.
Stocks soared on Tuesday in response to the imminent signing of a $2 trillion (£1.7 trillion) US stimulus bill and a huge cash injection by the US Federal Reserve. They rose again yesterday.
But Jim Reid of Deutsche Bank said investors’ thoughts had returned to the impact of coronavirus – which has led to a slump in demand as people stay indoors and severely disrupted supply chains.
He said the attention is now on US jobless claims for March, due out later today. Analysts predict they will be some of the worst figures on record.
“Our US economists are forecasting an unprecedented surge in claims, up to 1.7m, having been 281,000 the previous week and 211,000 the week before that,” said Reid.
FTSE 100 awaits Bank of England decision
FTSE 100 traders also await a Bank of England interest rate decision later. It has already cut rates to a record low of 0.1 per cent.
Jasper Lawler of London Capital Group said: “Negative interest rates now would probably just smack of desperation. There’s also a widespread view that the negative rates experiment in the Eurozone has failed.”
The Bank may announce other policies – such as an increase in targeted lending – in coordination with the Treasury. Chancellor Rishi Sunak is expected to announce plans to help the UK’s self-employed today.
The pound was 0.3 per cent higher against the dollar at $1.191. The dollar has fallen since the Fed announced unlimited bond-buying.
Meanwhile, the yield on the UK 10-year government bond, or Gilt, was down four basis points (0.04 percentage points) at 0.405 per cent. Yields fall as prices rise, indicating investors are buying UK bonds.
Wall Street’s indices the S&P 500, Dow Jones and Nasdaq are all set to open lower, according to futures prices.