The FTSE 100 and US stocks slipped as investors weighed up rising coronavirus cases and the latest decisions by the Bank of England and US Federal Reserve.
London’s main stock index fell 0.5 per cent to 6,017 points at 3pm. Mid-cap firms were hit harder, with the FTSE 250 dropping one per cent.
On Wall Street, the Nasdaq index slipped 0.1 per cent, continuing a now three-day decline in big tech stocks. The S&P 500 fell 0.3 per cent and the Dow Jones was down 0.4 per cent.
Europe’s continent-wide Stoxx 600 rose 0.4 per cent, however. Germany’s Dax was down 0.1 per cent and the French CAC 40 had fallen 0.9 per cent.
The downward shift came as investors digested the resurgence of coronavirus around the world.
Global cases topped 30m yesterday. And countries from France to South Korea are frantically fighting the virus they once thought they had under control.
Investors have also been left somewhat disappointed by the US Federal Reserve, which did not signal any further easing on Wednesday.
FTSE 100 down as lenders hit record low
For the moment, the global economic recovery is still faring well. FTSE 100 investors today digested data that showed UK retail sales rose again in August, and now stand four per cent higher than before Covid.
Yet the potential for further lockdowns hammered travel stocks. Health secretary Matt Hancock today said he did not rule out another lockdown, although he said it was not being planned.
British Airways-owner IAG was the biggest faller on the FTSE 100, plunging 11.6 per cent. Jet engine-maker Rolls Royce shed 4.4 per cent and Intercontinental Hotels fell 4.5 per cent.
“Amid growing chatter about a potential two-week nationwide lockdown in October in the UK, it was perhaps no surprise to see investors lose interest in stocks that could be negatively affected by such activity,” said Russ Mould, investment director at broker AJ Bell.
UK banks also took a hit after the Bank of England yesterday said it was working out how it would implement negative interest rates should they be needed. Lower interest rates damage banks’ profitability.
The FTSE 350 banks index slumped to its lowest level in almost three decades. Investors have dumped bank stocks, worried about coronavirus loans to companies and record-low interest rates.
The pound was down 0.2 per cent against the dollar at $1.295. It has had a volatile few weeks as Brexit has returned to the headlines.
It was not all bad on the FTSE 100, however. The rise in retail sales in August helped Sainsbury’s shares climb 2.1 per cent and Tesco’s rise one per cent.
Wall Street’s losing streak continues
Wall Street has had a torrid three weeks after investors second-guessed the recent stellar rally in tech stocks and hit the sell button.
Investors were left underwhelmed by the US Federal Reserve meeting on Wednesday, after chair Jay Powell did not signal any more stimulus was imminent. Stocks sold off despite the Fed improving its economic forecasts for the US.
Also on traders’ minds is the lack of progress between Republicans and Democrats over the next round of fiscal stimulus.
“What’s more, tech stocks – which were a driving force behind the outstanding stock market comeback – remain shaky and vulnerable to more downside,” said Craig Erlam, senior market analyst at currency firm Oanda.