FTSE 100 closes lower as new virus cases unnerve markets
The FTSE 100 closed in the red today as coronavirus cases in the US helped take the shine off some better-than-expected economic data.
The blue-chip index swung between the red and the green in morning trading, but finished down 0.2 per cent at 6,1568 points.
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The FTSE 100’s European peers also fell in afternoon trading and were set to close lower. Wall Street rose in its morning session, however.
US stocks make modest gains on vaccine hopes
US stocks rose despite a warning from US infectious diseases chief Dr Antony Fauci that the country could see coronavirus cases soar to 100,000 a day.
The US yesterday recorded its biggest single-day spike in cases since the pandemic began with 47,000 new infections.
Nevertheless all three major US indices made gains in early trading today, as rising hopes of a Covid-19 vaccine overshadowed concerns of another round of possible lockdowns.
Pfizer and German biotech firm Biontech said a coronavirus vaccine they had developed had shown potential and was found to be well tolerated in early-stage human trials.
The benchmark S&P 500 climbed 0.56 per cent in the first hour of trading, while the Dow and Nasdaq added over 0.43 per cent apiece.
Virus fears and Hong Kong tensions hold back UK equities
In the UK, mid-cap companies performed better than blue-chip firms. The FTSE 250 closed 0.4 per cent higher as investors clung to hopes of more stimulus and a pickup in economic activity in the second half of the year.
Yet analysts said the FTSE 100 and European stocks are fearing a second wave of coronavirus infections derailing the world’s economic recovery.
“For the same reason that markets didn’t take much notice of backward-looking apocalyptic economic data in the spring, more positive data seen recently is also being put to one side,” AJ Bell investment director Russ Mould said.
Fresh tensions in Hong Kong, which has passed a new law handing China unprecedented power over the city, are also a cause for concern. Today police have already made dozens of arrests under the national security law.
Mould said a warning the US faces hitting 100,000 daily coronavirus cases has led to “considerable nervousness” on the FTSE 100.
“Notably traditional safe haven gold continues to shine with futures prices late yesterday having reached their highest levels since 2011,” he added. Gold stood at around $1,750 per ounce.
Improved PMI fails to guard FTSE stocks
Joshua Mahony, a senior market analyst at online trading platform IG, added that improved manufacturing data for June has failed to lift the FTSE 100.
He said fears over the rising number of US coronavirus cases has dampened optimism among traders.
The key dilemma stock markets face is an “ongoing tug-of-war between those optimistic of the benefits that come with lockdown easing, playing off against fears of further restrictive measures if cases pick up in response”, he said.
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“The US remains the key hotspot for investors, with Florida and Texas potentially the first of many states that will require another a second bout of restrictions if the virus is to be brought under control.
But he added that the EU’s more effective battle against coronavirus is likely to bolster European stocks in the coming weeks. “We are now likely to see European markets outperform as a united front on financial support bolsters the impressive virus response seen over recent months.”
European stocks dip after glitch
European stocks also fell after a technical glitch affected several of the continent’s exchanges.
Trading on Germany’s DAX was halted for almost three hours due to the technical issue. The index was down 0.4 per cent as it headed towards the close. France’s CAC 40 was down by 0.2 per cent.
Read more: Trading in Germany’s DAX and other European exchanges resumes after technical glitch
Asian markets struggled to make headway on Wednesday. MSCI’s broadest index of Asia-Pacific shares outside Japan inched 0.2 per cent higher, with the Shanghai Composite gaining 1.34 per cent.
Sentiment had been boosted by signs that China’s factories are slowly gathering steam as the world’s second biggest economy begins to recover, with the Caixin/Markit manufacturing PMI rising to 51.2, compared with expectations for 50.5.