FTSE closes Tue with 2.56% gain
The FTSE 100 has ended Tuesday at 5,295 points, gaining some 2.79 per cent over an up-and-down trading session.
Early gains in the blue-chip index were eroded and it spent much of the morning in the red, before climbing in the afternoon as speculation mounted that the UK chancellor would announce support for businesses and the US would embark on a massive fiscal stimulus package.
As the chart below shows, Tuesday had several winners and losers.
Performance of FTSE 100 members on 17 Mar 2020
Source: London Stock Exchange
Mid-caps in the FTSE 250 fell close to 2.96 per cent while the FTSE Small Cap was down 4.37 per cent.
S&P 500 opens with gains after 12% crash
The US stock market rose at the start of today’s session, after posting some heavy losses yesterday.
As at 15:09, the S&P 500 was ahead 3.5 per cent at 2,468 points. This followed a fall of 12 per cent on Monday.
The Dow Jones is also higher in early trading.
There’s a more mixed story in Europe, where markets opened this morning on a positive bounce after yesterday’s falls.
However, many have handed back some of their gains. The FTSE 100 has been in negative territory for most of the day but is now in the black, while the French Cac 40 is only a slightly gain.
The Italian FTSE MIB and Spanish Ibex 35, on the other hand, are much higher at time of writing.
Long bonds have never been so volatile
Source: Bloomberg, Janus Henderson Investors, as at 13 March 2020
Paul O’Connor, head of multi-asset at Janus Henderson Investors, said: “Fixed income markets have offered no refuge during the last phase of the sell-off. Most government bond markets delivered negative returns last week, failing to provide their usual risk-hedging characteristics. US long bonds have just experienced their most volatile 10-day period ever.
“Things have been just as turbulent in other hitherto-defensive assets, with investment grade corporate bonds experiencing their worst week in the 20-year life of the major indices and gold delivering its worst weekly performance since 1983.”
“It won’t be long before employment starts to fall”
Commenting on today’s UK employment numbers from the ONS, Pantheon Macroeconomics chief UK economist Samuel Tombs said: “Looking ahead, it won’t be long before employment starts to fall.
“The election does not appear to have had a major positive impact on firms’ appetite for labour. The three-month average measure of job vacancies was a mere 19k, or 0.1 per cent higher in February than in the three months to November and remained a hefty 5.1 per cent below its January 2019 peak.
“Moreover, Covid-19 looks set to mean that firms in the travel and discretionary services sectors cut headcounts aggressively, while most firms will pause on hiring plans. Wage growth likely will slow over the next year too.
“Admittedly, the National Living Wage is set to increase by 6.2 per cent in April, the biggest increase since it was introduced in 2016. We estimate that around 10 per cent of workers will directly benefit from the increase, double the proportion five years ago.
“But a decline in job-to-job flows, due to the hiring freeze and an increase in workers’ risk aversion, likely will ease pressure on firms to pay their existing workers more.”
UK employment at record high before coronavirus outbreak
The UK employment rate reached a joint record high of 76.5 per cent in the three months to the end of January, official figures show, but falls are expected as the impact of coronavirus is felt.
Figures published by the Office for National Statistics this morning also showed that the UK unemployment rate continued to decline over the period, falling to 3.9 per cent – a level at which it is expected to plateau.
However, analysts forecast UK unemployment to rise in the near future given the spread of coronavirus and measures taken by the government recently to limit mass gatherings, encourage home working and reduce travel.
Airline and hospitality sector jobs are seen as especially at risk.
The FT reported that many airlines face bankruptcy by May due to governments’ widespread travel restrictions, cancelled holiday plans and increased ‘social distancing’, meaning that both staff and flight capacity could be reduced.
The UK government’s latest measures asked workers to work from home where possible, especially those in London, and to avoid unnecessary travel, as well as staying away from crowded, public areas advising them not to visit theatres, restaurants, pubs and bars.
Chancellor Rishi Sunak is expected to announce a stimulus package for British businesses today to help them through the coronavirus crisis.
“There are decades where nothing happens; and there are weeks where decades happen”
Robert White, senior analyst at Momentum Global Investment Management, said: “‘There are decades where nothing happens; and there are weeks where decades happen’.
“After the longest bull market on record finally came to an end last week, Lenin’s famous quote concisely sums up the current mood among investors. The S&P 500 officially moved into bear market territory on Thursday after it breached the 20 per cent level in a record 16 sessions of trading.
“Such price action reflects the tragic reality that the coronavirus has now caused the death of thousands globally, and the focus quite rightly is on limiting its human cost. Amidst the barrage of negative news, it is important for long-term investors to act rationally and take account of the situation as it develops.”
European markets open higher but FTSE falls back
The FTSE 100 opened Tuesday’s session with a rise of with just over 2 per cent, before falling back in early trading as the UK faces stricter guidelines to tackle coronavius.
The index rose in the minutes after opening but was down by more than 1 per cent at 08:45. This followed heavy losses in the US overnight, with the S&P 500 plummeting some 12 per cent.
Performance of FTSE 100 on 17 Mar
Source: Google Finance
Other European indices are up this morning, with France’s CAC 40 and German DAX indices opening with an almost 4 per cent rise before falling back slightly.
Dow Jones futures rose 800 points last night, following one of Wall Street’s worst days since the 1987 market crash yesterday.