FTSE 100 shares plunge amid fears over second Covid lockdown

Shares in London have come under severe pressure amid fears that a second wave of Covid-19 cases will force the government into harsh lockdown measures that will damage the economy.

The FTSE 100 – the leading benchmark of the UK stock market – was down almost 200 points in early trading and on course for its worst day in three months.

With the health secretary, Matt Hancock, warning that the UK was at a coronavirus “tipping point” and that people tended to contract Covid-19 in social settings, shares in travel and hospitality companies were among the hardest hit by the sell-off.

The British Airways owner, IAG, was the biggest faller on the FTSE 100 on Monday morning, down 14%. Shares in the FTSE 250 pubs group Mitchells & Butlers were down 13%, while JD Wetherspoon fell 8%.

The transport secretary, Grant Shapps, said the government could not wait for deaths to start rising before taking action.

London was not alone in big falls in share prices. Markets in the rest of Europe were also affected by concerns that measures to prevent the virus spreading would lead to slower growth, higher unemployment and a higher rate of business failures. The 3% early fall in the FTSE 100 was matched by a similar drop in Milan, with slightly smaller declines of 2.5% in Frankfurt and 2.3% in Paris.

“Concerns are rising that the summer recovery is probably as good as it gets when it comes to the recent rebound in economic activity,” said Michael Hewson, the chief market analyst at CMC Markets UK.

“This reality combined with the growing realisation that a vaccine remains many months away, despite [Donald] Trump’s claims to the contrary, has made investors increasingly nervous, as we head into an autumn that could see lockdowns reimposed.”

Reports that UK banks had channeled illicit funds over more than two decades added to the woes of the FTSE 100, which is heavily weighted with bank shares.

Hancock said preventative measures taken by the government would be different from the blanket lockdown, which led to a 25% slump in economic activity in two months after being introduced at the end of March.

The economy began to claw back some of the lost ground from May onwards, but there are growing concerns that the recovery will peter out if new restrictions are imposed.

Ministers are determined to keep schools open but hefty falls in the share prices of pubs, brewers, hotel groups and travel companies reflects the belief that consumer spending will be affected by new measures to enforce social distancing.

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