Slump as GDP drop shakes London traders

The London markets lost some of their recent steam as they closed in the red on the back of news that the economy shrank by 2% in the first quarter of 2020 (see page 31).

The FTSE 100 closed 90.72 points lower at 5,904.05p at the end of trading yesterday.

Connor Campbell, financial analyst at Spreadex, said the index could have seen a “far greater” decline, given the fall in GDP, but shared a lot of the pain with sterling during yesterday’s session.

The value of the pound slipped against both the euro and the dollar as currency traders swallowed the latest dramatic set of economic figures.

The value of the pound fell 0.3% versus the US dollar at 1.222 and was down 0.1% against the euro at 1.129.

Elsewhere in Europe, the major markets saw a sharper decline than the FTSE as traders continue to be dogged by fears over second coronavirus peaks across the continent.

David Madden, market analyst at CMC Markets UK, said: “The bullish run that equity markets enjoyed last month was largely down to a slowing of the infection rates as well as the reopening of industries.

“Now that some nations are slowly reopening sections of their economies, there have been increases in the rates of new cases, and that has spooked dealers.”

The German Dax decreased by 2.56%, while the French Cac moved 2.85% lower.

Across the Atlantic, the Dow Jones opened in the red after Fed chief Jerome Powell said additional policy measures might be needed to stop lasting damage to the US economy.