Stock markets around the world saw sharp falls today as fears grew among investors that many countries are risking a second lockdown should the coronavirus flare up again.
In London, the FTSE 100 index dropped back below 6,000 for the first time since mid-May when UK stocks were on an upward trajectory from the Covid crash of March. It closed down 141.47 points at 5989.99, a fall of more than 2 per cent
Equities were sold off across Europe, with France’s Cac-40 2 per cent down and Germany’s DAX falling 3 per cent.
Grim reading: Traders around the world hit the sell button today on second wave fears
Downward trend: The Footsie was hit by a triple whammy of second-wave fears, heavy losses for British blue-chips and some disappointing US economic data
European markets had already sunk into the red this morning despite some optimism in US markets last night after the Federal Reserve promised more support for the struggling economy.
But a crushing economic update from the US authorities sent Wall Street into the red this afternoon.
Data showed the US economy shrank at a dizzying annual 33 per cent in the April-June quarter – by far the worst quarterly plunge ever – as coronavirus shut down businesses, throwing tens of millions out of work and sending unemployment surging to 14.7 per cent.
And new jobless claims in US have risen for the second week in a row, after dropping for 15 straight weeks, as spiking coronavirus cases delay plans to reopen or cause some states to backpedal.
The Department of Labor said on Thursday that 1.43 million Americans filed for unemployment in the week ended on July 25, an increase of 12,000 from the prior week.
Slipping back: The FTSE 100 index has fallen back below the psychologically important 6,000 mark for the first time since mid-May
That sent Wall Street traders to the ‘sell’ buttons and although the Nasdaq was trading in the black again by late afternoon, S&P 500 was still off by 0.5 per cent and the Dow Jones industrial Average by 1 per cent.
Wariness about the economic implications of a second wave were exacerbated in London by a slew of disappointing results this week from leading firms.
Oil giant Royal Dutch Shell revealed a tremendous £14billion loss, due to falling oil prices and sales during the pandemic.
The FTSE 100 heavyweight also wrote down a record $16.8billion on the value of its assets as a result and its 6 per cent share price fall weighed heavily on the blue-chip index.
Meanwhile Lloyds Banking Group reported a shock pre-tax loss of £602million in the first half of the year, and warned investors that the impact of the pandemic was more ‘profound’ and ‘much larger’ than it expected.
That followed similarly grim figures from Barclays and Santander yesterday and the widely-held Lloyds shares fell a whopping 7.8 per cent to 26.15p.
Connor Campbell, financial analyst at Spreadex, said that things had ‘got real nasty … with the US stomping into the session with an ugly GDP reading’.
‘Though it wasn’t exactly a surprise,’ he added, ‘and came in a smidge better than consensus forecasts, there is arguably no way to greet news of a 32.9 per cent contraction in the second quarter – at the annualised rate – than with a cliff dive into the red.
‘That number – the worst since the 1940s – caused the Dow Jones to fall close to 500 points, leaving the index in danger of sinking under 26,000 for the first time in three weeks. Remember, that US GDP reading comes after a worse than forecast 10.1 per cent contraction in the German economy, meaning the markets were already in a foul mood.’