Coronavirus: FTSE 100 ends two-day rally as EU recovery stalls
The FTSE 100 could not recover from a 1.2 per cent slump today after EU finance ministers failed to agree steps towards a coronavirus recovery.
London’s blue-chip index fell 65 points to 5,638 within its first half hour of trading today.
It followed two consecutive days of sharp gains for the FTSE 100.
France’s Cac dropped 1.4 per cent and Germany’s Dax also fell 0.7 per cent.
The Euro Stoxx 600, a pan-European index, fell 0.87 per cent.
EU fails to agree economic recovery strategy
Markets were reacting to EU finance chiefs’ failure to agree a deal on how to battle the economic fallout of coronavirus.
In a teleconference that lasted a reported 16 hours, EU member states’ finance bosses could not agree on a vision on how to help European economies recover from coronavirus.
France and Europe’s worst-hit southern countries clashed with Germany and more hawkish northern states.
The groups have disagreed over whether to issue joint debt in the form of coronabonds to aid an economic recovery. German Chancellor Angela Merkel’s government in particular has opposed the idea.
Instead a new press conference was pencilled in for later today.
EU quarrel hits FTSE 100
Connor Campbell, financial analyst at trading platform Spreadex, said the failure of EU members to settle on a coronavirus recovery plan has hurt European stocks and the FTSE 100.
Josh Mahony, senior analyst with online trader IG, said the EU’s quarrel was the “talk of the town” today and has hit the FTSE 100.
“Overnight squabbles [saw] finance ministers ultimately fail in their bid to introduce an aid package worth half-a-trillion euros,” he said. “This is just the latest in a list of worrying events which highlight the feeling of dissatisfaction over the EU’s coronavirus response.”
It came as the EU’s top scientist quit his role last night and criticised the EU’s coronavirus strategy.
“The squabbles seen last night were a clear reminder of just how difficult it can be to find agreement between 27 nations who have all seen vastly different experiences in recent weeks,” Mahony added. “Until a resolution on this package is found, we could see stock markets continue to struggle.”
FTSE 100 stocks slip up under pressure
The FTSE 100 posted a 57-point fall by early afternoon.
Energy stocks BP and Glencore sank 3.2 per cent and 4.2 per cent respectively.
And Tesco also sank 4.5 per cent as it revealed it may take a £925m hit from hiring staff to cope with UK stockpiling.
And other fallers on the FTSE 100 included Rolls-Royce, which sank almost 10 per cent after jumping a similar amount yesterday as the index pushed higher.
Falling coronavirus death rates – and therefore hopes Europe could ease lockdowns – lifted the FTSE 100 yesterday. But there was less optimism among traders today.
Coronavirus cases still falling
The UK recorded its highest number of coronavirus deaths yesterday at 786. And New York also reported its highest single day death toll of 731.
Meanwhile, US stocks reversed gains of over three per cent yesterday to fall slightly into the red.
“Though the UK and New York announced their deadliest days yesterday, the number of cases slowed in these locations and elsewhere in the world,” Swissquote Bank senior analyst Ipek Ozkardeskaya said.
“The fact that we may see a peak and a reversed trend in number of cases and deaths in most parts of the world indicates that the worst is probably behind. But it does not necessarily mean that the containment measures should be lifted too quick and too soon. As the risks prevail, the world could stay confined for couple of more months. In this respect, we could see energy and transport shares underperforming the rest for an extended period of time.”
US stocks could lift Europe
Craig Erlam, senior market analyst at Oanda, blamed the drop in US stocks for today’s fall on the FTSE 100 and European stocks.
European stock markets are a couple of percent lower on Wednesday, pulling back a little after another strong start to the week.
“The reversal on Wall Street on Tuesday has weighed on risk appetite across Asia and Europe today,” he said.
But he added that the the wider trend of declining new coronavirus cases – if not deaths – is reason for traders to be optimistic.
“Falling new cases in the worst hit parts of Europe and now New York is fantastic news. We haven’t had much to celebrate recently and should take the wins as and when they arrive,” Erlam said.
But calling that pattern “early days”, Erlam warned “the worst is not behind us”.
While plans to ease Europe coronavirus lockdowns fuelled the FTSE 100 rally earlier this week, restrictions will remain until at least the end of April.
And the US coronavirus outbreak is further behind the curve than other countries, meaning it is not clear when economies will begin to recover.