Friday 31 July 2020 1:59 pm

Markets live: FTSE 100 slips and dollar suffers worst month in a decade

The FTSE 100 fell in early afternoon trading as investors weighed up weak company earnings and the dollar was set for its worst month in a decade as US coronavirus cases continued to rise.

London’s premier stock index was down 0.3 per cent at 5,969 points. The FTSE 250 of mid-cap stocks rose 0.4 per cent, however.

Read more: Big Tech cashes in on worst day for US economy since Great Depression

In Europe, Germany’s Dax rose 0.7 per cent. France’s CAC 40 was 0.1 per cent higher and the continent-wide Stoxx 600 rose 0.4 per cent.

Gold continued its stellar rise amid economic uncertainty. It was last up 0.9 per cent at $1,974, pushing towards a fresh all-time high.

The dollar dipped, putting it on track for its worst month in a decade as coronavirus cases surge.

US stocks were set to higher after blockbuster earnings from Apple, Amazon, Google and Facebook yesterday.

“European stocks [are] managing to catch some of the Nasdaq’s tail winds following a host of strong earnings releases overnight,” said Joshua Mahony, senior market analyst at IG.

FTSE 100 rises cautiously after weak bank earnings

Dire banking earnings failed to put the FTSE 100. Natwest – formerly RBS – sunk to a £770m loss in the first half of the year but its shares rose 1.3 per cent as its capital buffers increased.

It put aside £2.9bn to cover loan losses associated with coronavirus. It was higher than analysts had been expecting.

TSB similarly swung to a loss after setting aside billions of pounds to cover loan losses. But its shares also rose.

Russ Mould, investment director at AJ Bell, pointed out that even a 0.5 per cent gain for the FTSE 100 today would put it down 2.4 per cent on the month.

Read more: Natwest sinks to a loss as it sets aside £2.9bn for bad loans

“July has been a second bad month in a row for investors in UK stocks with the FTSE 100 index now trading at lows last seen in late-May.”

“Tobacco, banks and media have been the worst performing FTSE 350 sectors in July,” he said.

It was not all bad, however. British Land Company was the biggest riser, climbing 4.6 per cent after Nationwide said house prices rebounded in July.

Land Securities Group jumped 3.6 per cent. Private equity firm 3I climbed 3.2 per cent.

European stocks unfazed by dire GDP figures

Investors were also confronted with dire economic data. The Eurozone economy contracted by a record 12.1 per cent in the second quarter, figures showed today.

Spain’s second-quarter performance was worse than expected with a record 18.5 per cent quarter-on-quarter contraction. Italy suffered a fall in GDP of 17.3 per cent.

The French economy contracted by a record 13.8 per cent in the second quarter. That was better than analysts had feared, however.

Read more: Eurozone economy shrinks by record 12 per cent as pandemic bites

FTSE 100 and other stock market investors chose to shrug off the terrible data, however. They instead looked towards a second-half rebound and possible stimulus from the US.

“Traders have adopted a risk-on strategy this morning, even though the risks in relation to the pandemic are higher,” said David Madden, market analyst at CMC Markets.

Dollar suffers worst month in a decade

The US dollar fell 0.1 per cent on its index against other currencies. That put it on track for a fall of almost five per cent over the month, its worst drop in a decade.

The greenback has lost favour with investors as coronavirus cases have surged in the US. They rose by 65,900 yesterday, taking the total number of cases to 4.4m. The US has now suffered 150,300 deaths.

Investors fear that states could be forced to reimpose strict lockdowns, having already brought back some rules. Federal Reserve chairman Jay Powell warned on Wednesday that data was “pointing to a slowing in the pace of the recovery”.

Stuart Rumble, multi-asset investment director at Fidelity International, said: “The relentless spread of Covid-19 across the US and improving risk sentiment elsewhere is crimping demand for the safe-haven reserve currency.” 

The slump in the dollar has led to the best month for the euro in a decade. And the pound is heading for its best July in 30 years, which is weighing on the FTSE 100.

Read more: Republicans reject Trump’s call for US election delay

Edward Moya, senior market analyst at currency firm Oanda, said the dollar is likely to “remain a punching bag”. 

“Real yields continue to fall deeper into negative territory, Europe seems like they will have a better second half, and the Fed is likely going to telegraph more moves in September.”