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FTSE 100 sell off accelerates as Covid business disruption intensifies

  • FTSE 100 down 2.3%.
  • ITV down 6%.
  • British Airways owner IAG down 5.5%.
  • Rolls Royce down 5.5%.
  • FTSE 250 down by 2%.
  • EasyJet down 6.8%.
  • TUI down 4.4%.

 

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown comments:

“The FTSE 100 sell off has accelerated as strong undercurrents of Covid uncertainty wash through the financial markets, with travel stocks among the biggest fallers. The blue chip index fell by 2.3% by mid-afternoon, dropping well below the psychologically important 7,000 mark. Far from giving investors a jolt of confidence, Freedom Day has seen it evaporate, as sharply rising infection rates disrupt businesses across the UK. From retail to manufacturing and hospitality, the warnings are coming thick and fast that mandatory isolation is leading to reduced business operating hours, a drag on sales and a reduction of output. Amidst concerns that soaring infection rates could derail the recovery are worries about inflation heating up, and the knock on effect of rising interest rates combined with the roll back of mass bond buying programmes.

ITV, down by 6%, was the biggest faller on the FTSE 100 by mid-afternoon as concerns grew that a slowdown, brought about by higher infection rates, could dent marketing budgets once more. The fear that belts may start to be tightened again in the ad world has also dented the share price of global advertising group WPP which was down around 4%.

The confusion surrounding quarantine and testing rules for international travel is also leading to fresh jitters about recovery for the aviation and tourism industries. Optimism which had been on the horizon just a few weeks ago has again been obscured by dark clouds, especially with the snap decision to enforce a 10 day quarantine for arrivals from France. With the rules for teenagers also unclear, many families, once hopeful for a holiday, are now putting away their suitcases, settling for a summer of staycations and day trips. British Airways owner IAG was among the biggest FTSE 100 fallers, dropping by around 5.5%. Rolls Royce also dropped by around 5.5%, which is unsurprising given it is so dependent on the international airline industry with its core businesses focused on the manufacturing and supply of commercial jet engines. Out of the top flight easyJet was on a steep decline, falling 6.8% with hopes of a boost to summer bookings evaporating, while tour operator TUI also fell 4.4%.

With some scientists warning that infections could reach 200,000 a day by September, there is now a feeling that the UK could be staring at a fresh Autumn lockdown. It’s not surprising that has caused nervousness among investors in Associated British Foods, the owner of Primark, with shares falling 4.5%. Primark has only just bounced back from the Covid shock and fresh closures would seriously derail its recovery.’’

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