Coronavirus: FTSE 100 falls as oil prices plummet
The FTSE 100 has slipped lower after the coronavirus situation worsened in the UK over the weekend and oil prices tumbled to an 18-year low.
Britain’s FTSE 100 index was 1.2 per cent lower at midday at 5,446 points. It had fallen 5.3 per cent on Friday after rallying strongly over the previous three days.
European stocks were also trading lower. Germany’s Dax index was down 0.1 per cent, France’s CAC 40 was one per cent lower, and the pan-European Stoxx 600 was 0.6 per cent down.
Stocks had fallen as much as three per cent in early trading, but recovered somewhat on the news that the number of new daily coronavirus cases dropped for the first time in weeks, falling 10 per cent on Sunday compared to Saturday.
However, investors were weighed on by tumbling oil prices, which plumbed depths not seen since the early 2000s as demand slumps but supply booms.
Brent crude oil fell 8.4 per cent to $22.83 per barrel. US crude fell 5.1 per cent to $20.41 per barrel after earlier slipping below $20.
“As a reminder of March’s madness, as the start of the month oil was trading at around $50. At the start of the year, meanwhile, it was at $66 per barrel,” said Connor Campbell, market analyst at trading platform Spreadex.
News of the spread of coronavirus has also made investors more gloomy over the weekend. Prime Minister Boris Johnson warned the situation will get worse before it gets better.
Britain has more than 17,000 confirmed cases of the disease and 1,019 deaths. The peak of the epidemic for the UK is expected to come in a few weeks.
A senior medical officer said lockdown measures to prevent the spread of Covid-19 could last months, raising new fears for the economy.
UK economy could shrink by 15 per cent
The Centre for Economics and Business Research (Cebr) today predicted coronavirus would cause UK output to plunge an unprecedented 15 per cent in the second quarter of the year.
Such a drop in activity would put the 2.2 per cent fall in the final quarter of 2008 in the shade.
UK businesses are suffering as lockdown measures, travel restrictions and supply-chain disruption damage the economy.
Airline Easyjet today said it will ground all of its planes due to coronavirus. The budget flyer warned “there can be no certainty of the date for restarting commercial flights”.
The FTSE 100’s Asian counterparts fell slightly overnight due to the oil price shock and worries about the extent of the economic damage coronavirus has caused.
Japan’s Nikkei index fell 1.6 per cent, China’s Shanghai composite dropped 0.9 per cent, and Hong Kong’s Hang Seng fell 1.3 per cent.
Investor sentiment was also dented by President Donald Trump’s decision to extend social distancing in the US until April. US stock markets are set to open higher, however.
The rally seen in stocks last week – Wall Street rose more than 10 per cent – led to excited speculation over the weekend about whether the bottom of the market had been reached.
Mark Haefele, chief investment officer at UBS Global Wealth Management said there is still great uncertainty about “the path of the virus and the success of stimulus implementation”.
He said in this environment “selectivity in equities is becoming more important”.