FTSE 100 and US stocks slide amid fears over global economy
The FTSE 100 and US stocks fell after the US Federal Reserve gave a pessimistic view of the economy and the number of Americans claiming new jobless benefits unexpectedly rose.
Investors are also concerned about rising coronavirus cases. France reported its biggest increase in cases since May and Spain is struggling to deal with its pandemic.
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London’s blue-chip index dropped 1.5 per cent in afternoon trading to 6,019 points. The FTSE 250 of mid-cap companies fell 0.7 per cent.
The US’s S&P 500 slipped 0.3 per cent. The Dow Jones was down 0.5 per cent.
The tech-heavy Nasdaq rose 0.1 per cent, however. Shares in Apple continued to rise, the day after it became the first company to become worth $2 trillion (£1.53 trillion).
Germany’s Dax and France’s CAC 40 were trading 1.4 per cent lower. The Europe-wide Stoxx 600 was down 1.2 per cent.
Fed gloom spreads to FTSE 100
Markets were bullish yesterday ahead of the release of the Fed’s minutes from its July meeting. The S&P 500 and Nasdaq both hit new all-time highs.
However, Fed policymakers highlighted uncertainties over the US economic recovery. They said the “health crisis would weigh heavily on economic activity, employment and inflation in the near term”.
And they said coronavirus “was posing considerable risks to the economic outlook over the medium term”.
The minutes weighed on US stocks last night and spilled over to drag down the FTSE 100 and European markets today.
US stocks dip after weak employment data
Wall Street optimism was further dented today by the latest US jobless claims figures. They showed that new claims unexpectedly rose to 1.11m last week from 971,000 a week earlier.
The rise confounded economists, who had been expecting another drop. It also took claims back above the 1m mark just a week after they had fallen below that level for the first time since March.
The figures add urgency to slow-moving talks between Republicans and Democrats on the next round of stimulus.
Patrick Spencer, vice chairman of equities at investment bank Baird, said: “The latest jobless numbers will probably have the effect of forcing Congress to come together to agree on another stimulus plan.”
Yet he said that claims were still well below the March peak of close to 7m, so “the US economy is moving in the right direction”.
Investment giants lead blue-chip fallers
Miner Antofagasta tumbled 5.5 per cent on the FTSE 100 after it posted a plunge in half-year earnings on weak copper prices. Fellow miner Evraz led the fallers with a 6.6 per cent fall.
Investment firms M&G and Standard Life Aberdeen both dropped more than five per cent as doubts set in about the global economy.
“Miners, financials, telecoms and energy [were] the worst performing sectors,” said Russ Mould, investment director at AJ Bell.
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“It was certainly a risk-off day, with investors shifting their focus to more defensive areas such as utilities and healthcare.”
Connor Campbell, market analyst at trading platform Spreadex, said the realities of the pandemic had “once again made themselves felt”.
Frasers Group soared 14.3 per cent on the FTSE 250, however, after predicting growth of up to 30 per cent in the coming financial year. That limited losses on the mid-cap index.
Dollar gains amid economic gloom
The dollar had been languishing at two-year lows but yesterday reversed course. Jim Reid of Deutsche Bank said: “Half the move came after the minutes were released and it’s held onto gains overnight too.”
The greenback was trading 0.3 per cent higher against a basket of other currencies this morning. The pound was down slightly at $1.31.
Read more: Pound slips after touching highest level since start of year
Kit Juckes of Societe Generale said that the dollar remained “very overvalued” despite its recent falls. “The big FX adjustment in the coming months (and years) will be further dollar weakness,” he said in a note.
Gold also edged higher to stand at $1,932 per ounce. Yet that was some way off its record high of more than $2,060 an ounce reached earlier this month.