London stocks slump on further virus lockdowns, Brexit uncertainty

Government sets stricter curbs in northern England; EU to keep trade talks with Britain alive; Marston’s slips as new restrictions force job cuts; recruiter Hays slides on lower quarterly net fees

London’s FTSE 100 fell to a neartwo week low yesterday as concerns over new coronavirus restrictions and Brexit-related uncertainty prompted investors to book profits after a rally earlier in the month.

After slumping as much as 2.5% during the session, the blue-chip index closed down 1.7% to mark its biggest daily decline since late September, with energy, insurance and mining stocks leading declines.

The mid-cap FTSE 250 fell 0.6% with London set to enter a tighter Covid-19 lockdown from midnight today as Prime Minister Boris Johnson seeks to tackle a swiftly accelerating second coronavirus wave.

“The issue is what it will actually do to the economy, and the fact that the UK is sort of backtracking on the progress that’s been made is not a good sign for the economic recovery,” said Greg Swenson, founding partner of Brigg Macadam, a London-based investment bank.

After tracking gains in global equities for two straight weeks on hopes of more US stimulus, UK stocks have also come under pressure this week as a Brexit trade deal remains elusive.

European Union leaders agreed to extend Brexit trade talks for few weeks yesterday, but also called for no-deal preparations should the troubled negotiations fail.

“Markets don’t like uncertainty and the fact that a no deal Brexit is looking like a possibility here is not good,” Swenson said.

Pub operator Marston’s Plc shed 1.4% as it announced job cuts due to the tiered-restrictions.

In company news, recruitment agency Hays Plc fell 1.3% after posting a 29% drop in its first-quarter net fees due to the coronavirus crisis.

Business supplies distributor Bunzl Plc and Britain’s biggest retailer Tesco Plc lost 2.4% and 3% in ex-dividend trading.

However, AO World Plc surged 30.7% after the online electricals retailer said it expect a 57% increase in first-half revenue on strong consumer demand during the Covid-19 pandemic.

“Renewed health concerns and tighter restrictions around Europe are hammering stocks,” said CMC Markets analyst David Madden.

“Dealers are dumping stocks for fear that economic activity will drop off because of the tighter restrictions in various parts of Europe.”

The pound, meanwhile, struggled ahead of a European Union summit where leaders will discuss post-Brexit trade talks, with Prime Minister Boris Johnson urging them to give ground or see Britain walk away with no deal.

Oil prices also faltered, losing more than 2%.

Investors tracked another sell-off in New York after US Treasury Secretary Steven Mnuchin warned that Republicans and Democrats were still “far apart” on a stimulus package before next month’s presidential and congressional elections.

However, analysts said traders were taking comfort from the possibility that Joe Biden and the Democrats will win the presidency and both houses of Congress, paving the way for a bigger stimulus than anything that could be agreed before the vote.

Adding to the downbeat mood on trading floors is the surge in coronavirus infections in Europe, which is forcing governments to revert to tough containment measures that observers fear could deliver a blow to a tentative recovery from national lockdowns earlier this year.

The crisis comes after hopes for a vaccine were hit by news that Johnson & Johnson had halted advanced trials after a volunteer fell ill, while Eli Lilly paused work on a treatment.

“The European Covid situation has been deteriorating again this week and more and more countries are introducing strict containment measures,” said Gorilla Trades strategist Ken Berman.

In Asia, Tokyo suffered steep losses, while Mumbai, Taipei, Manila and Wellington were also in the red.

Singapore and Hong Kong were both well down, with little reaction from news that the two cities’ governments were pushing ahead with plans to open a travel bubble in a first for Asia.