Global markets tumble amid pessimism over surge in Covid-19 cases | Stock markets
Stock markets have fallen across the world amid growing pessimism over rising Covid-19 infections, with £ 44bn wiped off the value of the FTSE 100 index of major UK companies when some have called pandemic restrictions in England “freedom day”.
The prospect of slowing global growth caused most European stock markets to drop significantly, after falling in Asia overnight, when Indonesia reported an increase in cases and some athletes were tested positive at the Olympic Village in Tokyo, with the Games due to open on Friday. .
In the UK, the FTSE 100 closed 2.4% lower at 6,844 points, its largest one-day decline since May 11 and its lowest close since early April.
In the process, £ 44bn was wiped off the value of FTSE 100 companies, with ITV being the biggest drop, down 6.6%, fearing ad revenue could be hit by any stalled recovery UK economy.
The massive sell-off of shares by investors has also hit travel and oil companies, banks and retailers. Shares of BP and Lloyds Banking Group ended the day down nearly 5%, while Primark owner Associated British Foods fell 4% and Next fell 3.4%.
Travel agencies were also among the biggest falls in London stock markets, as uncertainty over the spread of the virus fueled concerns over further crackdowns by the Johnson administration on travel arrangements to the ‘foreign.
British Airways owner IAG has shut down more than 5% and aircraft engine manufacturer Rolls-Royce has lost 6.5% of its market value. In the FTSE 250, easyJet fell 6.5% and tour operator Tui almost 4%.
The pan-European Stoxx 600 index fell 2.3%, its lowest close in two months, with the German stock exchanges Dax and French Cac falling 2.5%.
In the United States, Wall Street investors have joined in the stock market liquidation, as the Dow Jones industrial average fell more than 2% at lunchtime in New York City.
Fears that a loosening of foreclosure rules by Boris Johnson’s government would encourage the spread of new variants in the UK also weighed heavily on the value of the pound, which lost ground against the euro and the dollar. . The British pound fell to $ 1.37, its lowest since April, and fell about 0.6% against the euro to € 1.16.
Analysts said few markets were immune to the sense of foreboding that accompanied warnings from medical professionals that the virus could still cause increased hospitalizations and harm young people despite higher vaccination rates.
Susannah Streeter, senior investment analyst at stock broker Hargreaves Lansdown, said: “With some scientists warning that infections could reach 200,000 per day by September, there is now a feeling the UK might consider a new fall lockdown. “
Russ Mold, chief investment officer of brokerage firm AJ Bell, said: “Covid is spreading rapidly again and airlines, restaurants and leisure businesses might not get the strong summer trade they’ve been hoping for ever since. long time.
“The big concern in the market is whether we are going to see a slowdown in the global economic recovery, and this could be the dominant force that will cause a bad period for stocks in the weeks to come,” he said. .
Many investors have withdrawn their money from stocks and sought safe haven assets such as government bonds, pushing some yields – the effective interest rate on a bond – to lows not seen since February.
The 10-year US Treasury yield hit a five-month low of 1.26% and the German 10-year yield fell to minus 0.37%, the lowest since early March.
Brent crude, the international benchmark for oil, fell 4% to $ 70.63 (£ 52.21) a barrel amid concerns over the likely trajectory of global economic growth following earlier falls caused by Opec , the cartel of oil-producing countries, and its allies having reached an agreement. increase production to counter rising prices.
There was a ripple effect on oil majors like BP, Royal Dutch Shell and Total, which suffered price declines between 3% and 3.8%.
Lavanya Venkateswaran, analyst at Mizuho Bank in Singapore, said the 10-member Asean economic bloc covering Thailand, Singapore and the Philippines was on the brink of a resurgence of the virus after recent localized outbreaks.
“The more transferable Delta variant delays the recovery of the Asean economies and pushes them further into the doldrums,” she said.
Joshua Mahony, senior market analyst at IG in London, said the rise in infections in the UK was a setback for travel agencies and hotel companies as their shares were downgraded.
“Although the restrictions have been relaxed, the fact that Covid is so prevalent in the country is eliciting the kind of caution that could inhibit the exact economic activity encouraged by the government,” he said.