LONDON MARKET CLOSE: Stocks Sold Off As Covid-19 Alarm Bells Ring

(Alliance News) - Stocks in London ended firmly in the red on Monday as investors fretted over ...

Alliance News 21 September, 2020 | 5:02PM
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(Alliance News) - Stocks in London ended firmly in the red on Monday as investors fretted over mounting fears of a second wave of coronavirus infections.

UK Prime Minister Boris Johnson spent the weekend with senior ministers and advisers discussing what action to take as the rise in the number of new cases showed no sign of slowing. It is thought Johnson could announce new measures in a press conference as early as Tuesday.

The UK could see 200 or more deaths per day by mid-November if the current rate of infection is not halted, the government's chief scientific adviser has warned, as ministers consider further restrictions on households socialising.

Patrick Vallance said the "vast majority of the population remain susceptible" to catching coronavirus and the current situation required swift action to bring the case numbers down. He added that if current infection rates continue, the UK could see around 50,000 cases a day by the middle of October.

It comes as UK government ministers make final decisions on what national measures are needed to tackle rising cases, with Health Secretary Matt Hancock strongly hinting that separate households could be prevented from mixing.

There are fears that the UK will be facing some form of local restrictions, including 2200 BST curfews for pubs and restaurants, as the authorities grapple with the disease.

The FTSE 100 index closed down 202.76 points, or 3.4%, at 5,804.29. The mid-cap FTSE 250 index ended down 698.90 points, or 4.0%, at 16,870.78. The AIM All-Share index closed down 28.91 points, or 3.0% at 944.61.

The Cboe UK 100 index closed down 3.7% at 576.96. The Cboe 250 ended down 4.3% at 14,326.72, and the Cboe Small Companies ended 3.8% lower at 9,018.97.

In Paris the CAC 40 ended down 3.9%, while the DAX 30 in Frankfurt gave back 4.4%.

"The FTSE 100 has wiped out all its gains from early September in the space of three days, while US markets have seen losses accelerate, taking them to six-week lows. If this is the start of something bigger then we could have a long way to go before a bottom is in place - usually election years see US equities weaken from today into the end of October. With lockdowns returning and cases rising the overall outlook seems gloomy, and signs of growing political tension in the US in an already-fraught election campaign mean that investors will continue to find safety in havens," said IG Group's Chris Beauchamp.

In the FTSE 100, only four companies ended in the green, with supermarket chain Tesco ending the best performer, up 2.5%. Supermarkets were among the beneficiaries during the UK's initial lockdown earlier this year as online grocery shopping surged.

Fellow grocers J Sainsbury and WM Morrison Supermarkets closed up 0.9% and 2.3% respectively.

"In the face of what is a rapidly changing public health situation, we still anticipate a benefit to margins of the major supermarkets from the experience gained through the pandemic, and the impact on shoppers' confidence from the wider controls introduced since March, such as face masks being warn in-store," said Shore Capital's Clive Black.

Online takeout provider Just Eat Takeaway, which saw increased activity on its platform surge during the lockdown, closed up 1.4%.

At the other end of the large cap index, British Airways parent International Consolidated Airlines ended the worst performer, down 12% as the renewed rise in coronavirus cases in the UK and on the continent damaged demand for travel. Midcap peer easyJet closed down 8.2%.

In addition, jet engine maker Rolls-Royce closed down 11% in a negative read-across.

"The engineering giant was having problems before the pandemic set-in as it has issues with its Trent-1000 engine, so the chaos that engulfed the air travel made matters worse. It was reported that Rolls-Royce is in talks to raise GBP2.5 billion in funding. It is understood the group has been in discussions with sovereign wealth funds. Traders are turning their back on the stock as the need for a fresh capital injection is a sign of weakness," said CMC Markets analyst David Madden.

Elsewhere, e-commerce platform THG Holdings, known as The Hut Group, began trading on the Main Market. The stock closed at 579.80 pence Monday, up 15% from its initial public offering price of 500p.

The pound was quoted at USD1.2795 at the London equities close, down sharply from USD1.2949 at the close Friday, amid fears the UK will enter a second lockdown following a resurgence in coronavirus cases.

"The prospect of a national lockdown is weighing on sterling at the start of this week. New cases of Covid-19 have almost doubled to over 6,000 per day, with hot-spots including parts of Northern England and London. The effect a second national lockdown would have on many sectors, including the hospitality sector, has sent many stocks tumbling at the start of the European open," said analysts at OFX.

In addition, the euro was under pressure as a partial lockdown was imposed in Madrid. A million people in and around the Spanish capital on Monday were under new "stay-at-home" orders to contain another coronavirus surge.

The euro stood at USD1.1745 at the European equities close, sharply lower from USD1.1863 late Friday.

Against the yen, the dollar was trading at JPY104.65, up from JPY104.41 late Friday, with the Japanese currency the preferred market harbour.

Stocks in New York were sharply lower at the London equities close joining a sell-off in Europe on fears of new coronavirus lockdowns across the Atlantic and the diminishing prospects for another US stimulus package.

The DJIA was down 3.0%, the S&P 500 index down 2.9% and the Nasdaq Composite down 2.2%.

Adding to that unease, hopes of another round of US stimulus spending took another hit with the death of Supreme Court Justice Ruth Bader Ginsburg, which has sharpened already significant partisan differences in Washington ahead of the US presidential election November 3.

"The death of Justice Ginsburg lowers the odds that a fourth stimulus bill will pass Congress this session. It doesn't eliminate the possibility. Should the economy or stock market decline materially, or Covid-19 cases spike again, Congress will act. It almost always takes a good crisis for Congress to act. But barring a severe external shock, the heightened acrimony (if that is even possible) probably ensures no relief bill without a crisis," said analysts at Tower Bridge Advisors.

Brent oil was quoted at USD41.50 a barrel at the London close, down sharply from USD43.34 at the close Friday, amid heightened lockdown fears.

"Oil prices are sinking as Europe seems poised for coronavirus induced lockdowns and after Libya has restarted oil production. A strong dollar and mounting risks to the global economic recovery will continue to put pressure on prices," explained Oanda market analyst Edward Moya.

Gold was quoted at USD1,904.24 an ounce at the London equities close, lower against USD1,953.70 late Friday.

The economic events calendar on Tuesday has US existing home sales at 1500 BST.

The UK corporate calendar on Tuesday annual results from merchant bank Close Brothers and interim results from DIY retailer Kingfisher.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Rolls-Royce Holdings PLC 243.70 GBX 7.40
Sainsbury (J) PLC 208.70 GBX 1.21
Morrison (Wm) Supermarkets PLC 172.75 GBX 1.14
THG Holdings PLC Ordinary Share 666.60 GBX 6.66 -
easyJet PLC 548.40 GBX 2.58 -
Tesco PLC 214.10 GBX 1.61
International Consolidated Airlines Group SA 109.00 GBX 3.96 -
Just Eat Takeaway.com NV 9,174.00 GBX -1.61 -
Just Eat Takeaway.com NV 101.20 EUR -1.65 -

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