FTSE 100 Drops To Lowest Level Since April As Investors Run From Second Wave

A 2.5% slide yesterday took the UK’s benchmark FTSE 100 index to its lowest point since early April, shortly after the Covid-19 pandemic-inspired global sell-off of risk assets. A recovery that was anyway less pronounced than that of most rival global stock markets has given way to another, far more gradual, decline since June. However, losses appear to be accelerating again with global markets yesterday tumbling in unison as the pandemic’s second wave picks up a head of steam.

Yesterday’s slide wiped around £38 billion of value off the market capitalisation of the London Stock Exchange’s 100 biggest companies. With France introducing a new, full national lockdown and other European countries, now also including Germany, tightening social distancing restrictions back up again, the sectors that suffered the heaviest hit at the onset of the first spring lockdown were again among the biggest fallers.

Travel, tourism and leisure businesses were among those to suffer the steepest losses. The Easyjet share price fell by over 3% and Cineworld Group took a near 7% blow.

The FTSE 100 and London Stock Exchange more generally was certainly not alone in suffering losses yesterday. Major markets elsewhere in Europe were, perhaps as a direct result in their stronger recoveries from March lows, suffered even sharper drops. The German lockdown in particular, with Europe’s largest economy among those to cope best with efforts to keep the virus under control, has sent nerves rippling out across the continent. The continent’s worst affected benchmark index, the DAX 30 fell by 4.2% yesterday. In France the CAC 40 dropped by 3.4% and the broad-based and pan-European Stoxx 600 was 3% in the red. On Wall Street, the S&P 500 suffered a 3.5% drop.

Germany’s new ‘lockdown-lite’ will see restaurants, bars and gyms close down for an extended period, with progress monitored. Public events have mainly been called off and social gatherings will be subject to new guidelines. France will start a new full national lockdown with the same level of restrictions as were brought into effect in the spring, to last a month starting from tomorrow.

Saxo Bank analyst Christopher Dembik commented:

“The economic damage certainly will be massive. A rough estimate of the economic loss resulting from a one-month lockdown in France could be up to €60 billion, without counting the unavoidable wave of bankruptcies that will follow.”

Oil prices also reflected the clear drop-off in travel and economic activity that will now obviously continue until at least the end of the year, falling below $40 a barrel. Brent crude plunged 5.1% to $39.12.

The FTSE 100 is currently 25.1% off its mid-February high, which directly preceded the pandemic sell off. The more domestically-focused FTSE 250 was also down yesterday, albeit by a slightly less severe 1.9%.