Shares fell today amid continued worries about the covid impact on US states and closer to home in Leicester.
Traders have been bombarded by reports over the weekend about the resurgence of the virus in US regions that ended lockdowns early, which has added to last week’s nervousness in financial markets.
Some states are beginning to reverse the easing on bars and shops, leaving economists to question the rapid bounceback theory on the economy there.
That has led to a move into safe haven assets such as the dollar and gold.
US markets sold off heavily on Friday, and Asian stocks continued that direction today.
The FTSE-100 Index fell 29.85 to 6129.45 in early trading with further falls stemmed by positive sentiment ahead of Boris Johnson’s plans to push the button on big infrastructure spending projects. Schools, hospitals and roads are likely to be built and refurbished, boosting employment and hopefully longer term economic prospects of the regions targeted.
However, the likely return to lockdown of the city of Leicester will do nothing to help sentiment.
AJ Bell investment director Russ Mould, pointed out that a lockdown reinstatement for 400,000 Chinese people following a virus spike there proved investors’ fears of a “second wave” were correct.
He said: “All these events have reminded the world that the pandemic is still raging and the road back to normality is going to be a long and treacherous one.”
Shares had not fallen further, he said, because second wave flareups had been expected all along. Financial markets are forward looking and are predicting new covid outbreaks will be contained quickly.
Good news on travel restrictions easing lifted easyJet 3% and British Airways owner IAG 2% to the top of the FTSE-100 but gains were generally not particularly dictated by newsflow. A wide range of sectors populated the risers and fallers on a quiet day for corporate news. Other top Footsie gainers were Legal & General, CRH and Polymetal, all up 1%.
Fallers were led by Ocado, HSBC, Scottish Mortgage Investment Trust and Intercontinental Hotels Group, although none were down more than 1%.
In the second tier FTSE 250, oil and gas group Energean had a fruitful day, with a Buy recommendation from Bank of America analysts and a $466 million saving on its $750 million takeover of Edison E&P. It will now be buying the North Sea gas assets but not those in Algeria and Norway. The shares jumped 4%.
Stock-wise, Drax will be in the spotlight after rumours that it may be on the receiving end of takeover bids from an unnamed energy company. It gained 3% on the speculation.
The pound’s rebound against the dollar last week to the 1.2540 area did not last long, leaving analysts at CMC forecasting a move down to May’s lows at 1.2075 “a realistic possibility.” Anything lower than 1.2300 could lead to a drop to 1.2240.