The FTSE 100 closed at a three-week low today after tumbling in response to new coronavirus restrictions, while US stocks slipped amid worries over a lack of stimulus.
London’s blue-chip index slumped 1.7 per cent and closed at 5,833 points. It followed confirmation that London would be placed on “high alert”, meaning “Tier 2” restrictions apply from midnight tomorrow.
Disappointment about possible US stimulus and rising jobless claims saw Wall Street stocks open lower.
In Europe, Germany’s Dax was a particularly big faller, shedding more than two per cent as the continent-wide Stoxx 600 slumped.
Oil prices fell in anticipation of lower demand. Meanwhile, the US dollar and government bonds rose as investors sought out safe assets.
“It’s a classic risk-off day,” said Mark McCormick of TD Securities. He noted “a sour taste in global equities and a perky bounce in the USD”.
Travel and leisure shares drag FTSE 100 lower
Energy and leisure stocks were among the biggest fallers on the FTSE 100 amid concerns over the impact of tightened restrictions.
Yet it was packaging company Mondi that fell the most, with a 4.6 per cent drop. Publisher Pearson’s 4.4 per cent drop was the second biggest.
Shell’s shares closed 3.6 per cent down. BP was not far behind, and miner Glencore was also in the top 20 fallers.
Burberry, the internationally focused luxury brand, shed 4.3 per cent.
“European risk assets have been sold in an unseemly rush,” said Chris Beauchamp, chief market analyst at trading platform IG. He noted that the FTSE 100 was already back to the 5,800 level that marked the low in September.
Travel stocks were also in trouble across the UK market. Susannah Streeter, senior markets analyst at Hargreaves Lansdown, said: “It’s been another turbulent day of trading for airline stocks.
“IAG, Easyjet and Ryanair [have all fallen] as the resurgence of Covid-19 in key markets pushes prospects for recovery further into the future.”
Restrictions weigh on Europe
Countries across Europe are introducing tougher measures to limit the spread of the virus amid rising infection rates. For example France announced a curfew in Paris and other major cities last night.
London has been placed under “Tier 2” restrictions. That means people from different households are forbidden from mixing indoors.
The prospect of further economic disruption hit Germany’s Dax particularly hard. It was down 2.5 per cent, while France’s CAC 40 and the Europe-wide Stoxx fell 2.1 per cent.
David Madden, market analyst at CMC Markets, said: “Dealers are in risk-off mode because they fear that economies will suffer in terms of economic activity.
“The Eurozone’s economic recovery was already cooling before the recent spike in cases.”
US stocks hit by fading stimulus hopes
US stocks opened in the red as the chances of a stimulus deal before the 3 November presidential election continued to fade.
The tech-heavy Nasdaq was down 1.3 per cent while the S&P 500 was 0.8 per cent lower.
Figures also showed that new jobless claims unexpectedly rose last week. They were close to 900,000 after falling to 845,000 the week before.
The Brent crude oil price fell 2.2 per cent to $42.50 a barrel. The drop in riskier assets pushed up US Treasury bonds, and the dollar rose 0.5 per cent against a basket of other currencies.
“Traders are not holding their breath for a virus stimulus bill this side of the election,” said Edward Moya, senior market analyst at Oanda. “So risky assets will have a hard time rallying.”