FTSE 100 opens lower
Travel and hospitality stocks are dragging the London stock market down, as trading begins.
British Airways parent company, IAG, has fallen 2.3%, as hopes of summer holiday getaways are hit. Hotel groups Intercontinental (-1.4%) and Whitbread (-1.3%) and luxury goods maker Burberry (-1.9%) are also down.
Oil giant BP has dropped 2%, following the slide in crude prices this morning.
Britain’s FTSE 100 index is 40 points lower at 6686, a drop of 0.6%.
Oil price hit by European lockdowns
The oil prices has fallen over 1% today amid concerns that the latest pandemic curbs and slow vaccine rollouts in Europe will hit the economic recovery.
Brent crude is down 1.1% to $63.91 per barrel, extending its recent losses, while US crude is back at $60.90.
Brent hit over $70 per barrel early this month, fuelled by supply curbs and hopes that the US stimulus package would drive demand.
But it has since weakened, amid the row over distribution of AstraZeneca’s vaccine, the temporary suspensions of jabs in Europe, and the rise in Covid-19 cases there.
Jeffrey Halley, senior market analyst at OANDA, explains:
The vaccine spat is negative for European and UK asset markets this week.
Europe is also contending with spiking Covid-19 cases and reimposing or extending lockdowns across major European economies. That has been felt most keenly in oil markets, with reassessments of future consumption taking place.
The spike in Covid-19 cases in India, the world’s third-largest oil importer, threatens to deepen that gloom. In Europe’s case, though, its recovery is now inevitably delayed and will be a headwind for the Bloc’s markets this week.
China’s stock markets drops
China’s stock markets fell today amid worries over the sanctions imposed by the UK, Europe, US and Canada, and concerns that rising Covid-19 cases could hit the global recovery.
The benchmark CSI 300 index fell around 1%, back towards its lowest levels of 2021 — and sharply away from the 13-year high seen in January.
Hong Kong’s Hang Seng index was worse hit, down 1.4%, while South Korea’s KOSPI has lost 1%.
Ipek Ozkardeskaya, senior analyst at Swissquote, says rising global diplomatic tensions and escalating Covid cases are weighing on investor appetite.
Market sentiment is mixed on the back of rising Covid cases despite vaccinations and escalating tensions between China and the West.
The major US indices kicked off the week on a positive footing, but Asian indices didn’t follow up on the New York session gains. Most Asian indices traded in the red. Chinese indices led losses on the back of reviving diplomatic tensions after the US, the UK, Europe and Canada imposed sanctions on Beijing over human right abuses in Xinjiang. The latter will further weigh on fragile US-China trade relations and add fuel to the global trade war.
Rising tensions between China and Western countries are also weighing on the markets today.
Last night Britain, the EU, the US and Canada imposed parallel sanctions on senior Chinese officials involved in the mass internment of Uighur Muslims in Xinjiang province.
The sanctions will be imposed immediately and include travel bans and asset freezes on four officials — a co-ordinated move that sparked an immediate retaliation from Beijing.
Our diplomatic editor Patrick Wintour explains:
The move..marked the first time in three decades that the UK or the EU had punished China for human rights abuses, and both will now be working hard to contain the potential political and economic fallout. China hit back immediately, blacklisting MEPs, European diplomats and thinktanks.
The US and Canada also imposed sanctions on several senior Chinese officials as part of the coordinated pressure campaign.
The UK foreign secretary, Dominic Raab, said China’s treatment of the Uighur minority was “the largest mass detention of an ethnic and religious group since the second world war”. Evidence of repression in Xinjiang “is clear as it is sobering”, he said.
Introduction: European Covid-19 wave weighs on markets
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
European markets are heading for a lower open today as anxiety over a third wave of Covid-19 rises.
Overnight, Germany announced it will extending its lockdown over the Easter period in an attempt to slow the pandemic.
Chanceller Angela Merkel warned that the country was in a “very serious” situation and was racing to get vaccinations done.
Under the new restrictions, Social gatherings would be limited over Easter, with 1 – 5 April designated “quiet days” when no more than five adults from two households will be able to meet at home at once.
Merkel said at a news conference on Monday night:
“We are now basically in a new pandemic. The British mutation has become dominant.”
Yesterday, UK prime minister Boris Johnson warned that a third wave of coronavirus elsewhere in Europe would inevitably affect the UK.
People in this country should be under no illusions that previous experience has taught us that when a wave hits our friends, it washes up on our shores as well. I expect that we will feel those effects in due course.
Travel and hospitality stocks fell yesterday, as hopes of a summer holiday getaway took a knock.
The main European bourses are expected to open lower, with the UK’s FTSE 100 expected to drop 0.5%.
Fresh lockdown restrictions would be a blow to hopes of a strong economic recovery this year, as Stephen Innes of AXI Trader points out.
Germany is trying to slow the third wave by locking down over Easter. Although the major economies of the Eurozone are targeting a full vaccine roll-out by August, where they might still succeed, in the interim, a sustained recovery in consumer spending relative to the US and UK looks set to disappoint.
Oil is struggling in Asia as lockdown concerns rear their ugly head again. German Chancellor Merkel has proposed extending and slightly tightening the existing Covid restriction for another 4 weeks. Dr Fauci is warning of a possible Covid surge in the US following the rise in Europe. And the latter is likely sounding New York City reopening alarm bells with Mayor De Blasio urging a pause in the reopening narrative.
- 7am GMT: UK unemployment report
- 11am GMT: Industrial trends survey of UK factories in March
- 11.50am GMT: Bank of England governor Andrew Bailey at the Economist Sustainability week, on “Unlocking investment for net zero”
- 2pm GMT: US new home sales report