FTSE Falls As Covid and Inflation Fears Rise
TThe FTSE fell below 7,000 on Thursday as fears over inflation and soaring Covid cases haunted traders.
The London benchmark rallied slightly in the last hour of trading to close at 7,030.66, still down 1.7% – its biggest day-on-day decline in three weeks.
The losses wiped out all FTSE 100‘sa won so far this month and left him with just six constituents in the green. European markets responded to similar declines, after a mostly negative overnight session for Asian indices.
The minutes of the US Federal Reserve’s June meeting, released on Wednesday, showed that a recent surge in inflation in the United States was higher than expected as the world’s largest economy recovers from slowdown induced by the pandemic.
The jump fueled concerns that the Fed – and other central banks – could cut emergency stimulus packages and raise interest rates faster than expected.
“Despite the hope that we should be optimistic about a rebound in the second half of the year, instead we see traders focusing on the bumpy road ahead and the implications of rising inflation levels,” said Joshua Mahoney, analyst. senior market at IG.
He added that the minutes “underline the fact that the Fed is already planning a reduction phase.”
The surge in claims for unemployment assistance in the United States last week, up from 2,000 to 373,000, according to official data, has remained near a pandemic low. Economists polled by Bloomberg had estimated some 350,000 new requests.
Markets, meanwhile, were closely monitoring the increase in coronavirus cases as Japan declared a state of emergency ahead of the next Olympics next Thursday, and the French were warned to avoid Spain and the Portugal in the midst of growing cases.
Among the actions, airlines were one of the few bright spots for London markets, on news that fully vaccinated Britons returning from Orange List countries will no longer have to quarantine themselves from the 19th. July.
The new rules have been a boon for the beleaguered travel industry – one of the biggest losers in the pandemic – with the owner of British Airways AGI and easyJet both waivers following the announcement by Transportation Secretary Grant Shapps.
IAG increased 0.6p to 181.4p as one of the top six risers, while easyJet added 12p to 917p as the second best student of the FTSE 250.
Gains for the low-cost carrier also came in as it said holiday bookings in Orange countries rose 440% after the government’s announcement compared to the previous week. Managing Director Johan Lundgren said this means “millions of people will finally be able to reunite with their families and loved ones abroad or take that long-awaited trip this summer.”
He warned, however, that the theft could once again become a ‘preservation of the rich’ after Mr Shapps confirmed that those returning from Amber List destinations would still have to pass several Covid tests. “Expensive testing could unfortunately make travel out of reach for some,” said Lundgren.
Hungary Wizz Air and tour operator Tui both fell from 28p to £ 47 and 5.3p to 361.8p, respectively.
Overall gloomy outlook weighed on retailers, especially Burberry, which lost 85p to £ 19.87 and JD Sports, which fell from 42p to 937.6p. Both were among the benchmark 10 worst performers.
Hotel companies with a hotel and restaurant business joined them in the red. Pentecost bread drop from 115p to £ 30.83. On the FTSE 250, the owner of Frankie & Benny Group of restaurants was the worst performer with losses of 7.8p at 122p. Pub giants Mitchells & Butlers and JD Wetherspoon also ended lower, continuing losses from the previous session.
Elsewhere, Deliveroo shares fell 7.3p to 313.3p, leveling earlier gains even as the food delivery app reported orders jumped 88pc in the three months leading up to June. Deliveroo said he sees an opportunity to invest more in growth opportunities in the second half of the year, without elaborating.
However, the company warned that higher spending, along with the expectation that average order values would return to pre-pandemic levels, would weigh on profit margins. Deliveroo was listed in March in a much-anticipated stock market debut that saw its shares drop 30 percent. The title remains around 17pc below its listing price.
Wise, meanwhile, continued to rise after his London debut on Wednesday, closing 85p to 965p.