The FTSE 100 has closed 3.8 per cent down despite a lunchtime spike following desperate measures by the US and Germany to fight the crippling economic effects of the coronavirus pandemic.
London’s share index was down by 1.4 per cent at 5,117 at 1pm – up from 4,949 points and a drop of 4.82 per cent at this morning’s 8am opening.
The boost came after the US Federal Reserve pledged to buy as much US Government debt as possible and spend billions in bonds to bolster the economy.
In Germany, Angela Merkel’s Government signed off plans to spend 750billion euros in a bid to weather the economic storm caused by the COVID-19 pandemic.
But by 5pm, the UK index had fallen down 225 points again to 4,966 rallying back up slightly to 4,993.89 when markets finally closed.
The FTSE 100 has slumped back to a daily loss of four per cent despite a lunchtime spike following desperate measures by the US and Germany
5pm: A graph shows the UK share index had fallen down 225 points again to 4,966 – a daily loss of 4.34 per cent – by closing today
1pm: A graph shows the FTSE 100 share index down just over 1.4 per cent at 1pm – a rise of two per cent on this morning’s opening
8am: A graph shows the the FTSE 100 share index down 4.82 per cent as it opened today at 8am
At lunchtime, markets around the world saw near-immediate effects of the Federal Reserve’s lifeline, with the Dow Jones up more than 1,000 points.
Governments across the globe are desperately trying to reverse the crippling economic impact of the deadly coronavirus, with the Bank of England slashing interest rates twice last week to their lowest ever – 0.1 per cent.
In its boldest effort to protect the US economy yet, the Federal Reserve said it will buy as much government debt as it deems necessary and will also begin lending to small and large businesses and local governments to help them weather the crisis.
It will also mean the removal of any dollar limits from its plans to support the flow of credit.
The central bank’s all-out effort has now gone beyond even the extraordinary drive it made to rescue the economy from the 2008 financial crisis.
A statement today read: ‘The coronavirus pandemic is causing tremendous hardship across the United States and around the world,’ the Fed said in a statement.
‘Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus. While great uncertainty remains, it has become clear that our economy will face severe disruptions.
‘Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.’
This morning, the FTSE 100 opened at 4,949 – a fall of 242 points or 4.82 per cent on Friday’s close.
At 8am, the pound was worth $1.1651, compared to $1.1713 at the previous close and the euro was £0.9177 pounds compared to £0.9103 on Friday.
All but two FTSE 100 firms opened in the red, as firms with high international exposure took a particularly hard hit.
The index, which contains the biggest 100 companies on the London stock exchange, has faced a rough month, but reported gains in its previous two trading days on Thursday and Friday.
But this came to an abrupt end this morning as the UK index took the biggest hit after Democrats in the US Senate blocked the latest financial package on Sunday evening.
Senate minority leader Chuck Schumer described the stimulus deal as a ‘large corporate bailout with no protections for workers and virtually no oversight’ as the opposition party blocked the move.
Connor Campbell, financial analyst at Spreadex, said: ‘Europe’s meagre rebound managed at the end of last week was quickly wiped out come Monday morning, as investors woke up to partisan deadlock over the proposed US stimulus plan.
‘Even if the reasons behind the Democrats’ intransigence are sound, America’s inability to move things forwards stands in contrast to many of its now free-spending peers and has sent the market into another tailspin.’
UK firms with high exposure to the US were among the biggest losers, with Carnival and Ferguson both falling by more than 10 per cent in early trading.
The supermarkets continued to outperform the market, with Morrisons and Sainsbury’s the only two risers at the start of trading on Monday.
Last week The Bank of England was forced to slash interest rates for the second time in a week, from 0.25 per cent to 0.1 per cent, in a desperate bid to support Britain’s struggling economy.
A graph shows how the coronavirus outbreak has taken its toll on the UK in March
Interest rates are now the lowest they have been in the bank’s 325-year history.
It comes as the UK’s coronavirus death toll reached 281, with 5,683 cases nationwide.
Yesterday, the virus claimed its youngest victim, an 18-year-old from the West Midlands who had underline health conditions.
UK Government advice to stay home also sent a wrecking ball through Britain’s high streets with many businesses – including Timpson’s, John Lewis and Arcadia – closing thousands of shops over the weekend.
Yesterday Primark, which also announced store closures, confirmed it had taken the drastic measure of cancelling all outstanding orders to cut costs, devastating many suppliers’ businesses.
This evening at 7pm, McDonald’s will shut it doors after crowded restaurants proved to big of a risk.
The dire outlook for many of Britain’s best-known businesses means the FTSE 100 – which has plunged 32 per cent since mid-January – is likely to face further falls.
Business groups have pleaded with the Government to make emergency cash from grants and loans available immediately to avoid mass staff lay-offs.
Sir Richard Branson vowed to pump £215million into his Virgin empire to protect jobs amid the virus outbreak.
The 69-year-old said his businesses, which include Virgin Atlantic, Virgin Holidays and Virgin Media, were in a ‘massive battle to survive’ and felt Covid-19 was ‘the most significant crisis the world has experienced’ in his lifetime.
Elsewhere in Europe, where the spread of COVID-19 is now worse than in China, stock index figures fell to near eight-year lows.
In Germany, FAX futures fell 3.9 per cent and in France, figures were down 4.1 per cent.
In Asia overnight, the Indian stock market lost more than 11 per cent of its value, while Honk Kong’s Hang Seng index was nearly 5 per cent down.