The FTSE 100 fell more than 3 per cent upon opening this morning as UK investors reacted to the escalation of coronavirus cases in the US.
The index of Britain’s biggest companies was down 210 points or 3.6 per cent at 5,605 shortly after opening today, following three straight days of gains.
The fall is a reversal in fortunes for the FTSE this week which rose 2.2 per cent yesterday, taking increases in the past three sessions to 16.5 per cent – while, in the US, the Dow Jones was up more than 6 per cent on Wall Street yesterday.
But investors in Britain began to react today to a record rise in Americans claiming unemployment benefit as the pandemic hammered the world’s largest economy.
The US also now has the most confirmed cases of coronavirus of any country, with more than 85,500 positive tests – compared to 81,782 in China and 80,589 in Italy,
THIS WEEK: The FTSE 100 had enjoyed three straight days of rises before falling this morning
2020: The FTSE has lost about a quarter of its value since the outbreak intensified last month
Nigel Frith, a senior market analyst at AskTraders, told MailOnline today: ‘Whilst hopes of further US stimulus had boosted market morale on Tuesday, despite dire initial jobless claims figures, today the reality of the escalation of coronavirus cases in America is taking its toll.
‘However, losses have certainly slowed from earlier in the month. Investors are still showing nerves of holding positions over the weekend.
‘We will need to see more confidence is traders maintaining positions before any move higher can be sustained. Right now the fact is the data is awful.
‘Chinese industrial profits slumped by the most on record whilst data today is expected to show that consumer confidence plunged in Italy and France.
‘There is still a way to go until we can gauge the full extent of the damage – then we could start to see some more meaningful moves higher.’
Pedestrians wearing face masks pass a board for the Tokyo Stock Exchange in Tokyo today
Asian stocks rose overnight, with MSCI’s broadest index of Asia-Pacific shares outside Japan increasing 0.3 per cent, while Japan’s Nikkei went up 3.88 per cent, capping its biggest weekly gain on record.
Australian shares gave up gains to fall 5.3 per cent after a strong week.
The US House of Representatives is expected to pass a $2.2trillion stimulus package that will flood the world’s largest economy with money to stem the damage caused by the pandemic.
The US Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also take the unprecedented step of offering a direct backstop for corporate loans.
The US is now the country with the most coronavirus cases, surpassing even China, where the flu-like illness first emerged late last year.
Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.
Jay Woods, a US designated market maker with IMC and New York Stock Exchange floor governor, works yesterday in his home office in Basking Ridge, New Jersey
‘I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,’ said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo.
‘Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.’
The number of Americans filing claims for unemployment benefits surged to a record of more than 3million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed yesterday.
The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the US ‘may well be in recession’, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.
Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.
DOW JONES THIS WEEK: The Dow Jones was up more than 6 per cent on Wall Street yesterday
Chinese shares, battered this month because of the virus, rose 0.32 per cent today. Shares in South Korea, another country hit hard by the pandemic, rose 1.87 per cent.
Leaders of the G20 major economies pledged yesterday to inject over $5trillion into the global economy to limit job and income losses from the coronavirus.
With fears over the health of the global economy intensifying, a United Nations official warned that the number of jobs lost globally due to Covid-19 would be ‘far higher’ than the 25million estimated just a week ago.
The deepening economic crisis fuelled speculation that governments and central banks around the world will take further action to support businesses and families hit by the pandemic – boosting share prices.
Quincy Krosby, chief market strategist at Prudential Financial in New Jersey, said if the jobs numbers continue ‘there will be demand for more fiscal support’.
She said the rise in share prices suggested that investors ‘expect a larger stimulus package from the US government than the $2 trillion agreed upon’.
Chancellor Rishi Sunak (pictured at Downing Street yesterday) has launched measures to protect the self-employed during the coronavirus outbreak
In the UK, Chancellor Rishi Sunak launched measures to protect the self-employed.
In the US, Federal Reserve chairman Jerome Powell said the central bank was taking every action to support the economy.
But taking a different approach to President Donald Trump, who has said he wants the economy to be ‘roaring’ by Easter, Mr Powell said progress in controlling the spread of coronavirus would determine when business resumes.
‘We are not experts,’ he said. ‘We would tend to listen to the experts. The first order of business will be to get the spread of the virus under control and then resume economic activity.’
A record 3.3million Americans filed jobless claims last week – nearly five times higher than the previous high of 695,000 in 1982 and up from 282,000 the previous week.
And with nearly half the US’s population under some form of a lockdown, economists expect further increases in jobless claims.
In the US, Federal Reserve chairman Jerome Powell (pictured on March 3) said the central bank was taking every action to support the economy
Gregory Daco, chief US economist at Oxford Economics in New York, said: ‘We expect jobless claims will continue to climb as economic activity shuts down.’
Governments and central banks around the world have launched huge emergency packages to cushion the impact.
But a deep recession now looks inevitable as shops, factories and offices are shut down and people are told to stay at home.
The International Labour Organisation (ILO) – part of the UN – last week estimated that unemployment could rise by up to 25million worldwide due to coronavirus. By comparison, the 2008-09 global financial crisis increased global unemployment by 22million.
But Sangheon Lee, director of the ILO’s employment policy department, said: ‘The projection will be much bigger, far higher than the 25million we estimated.’