What’s happening: British stocks fell sharply on Thursday as markets digested the recent announcements by the US Federal Reserve.
What happened: Investors responded to the Fed’s economic projections yesterday, as London’s stock market remained closed on Wednesday when the central bank made its policy announcement.
London stocks declined for the fourth consecutive trading session yesterday, due to the Fed’s gloomy outlook and fears of a second wave of coronavirus infections in the US.
With companies looking to maintain liquidity during the pandemic crisis, stocks listed on Britain’s sub-market join firms belonging to the country’s main index to announce the lowering or scrapping of their dividends.
Why it matters: With total covid-19 cases exceeding 2 million in the US on Wednesday, some experts are expecting related deaths to reach 200,000 by September. Some states in the country have also begun witnessing a rise in coronavirus infections, fuelling fears of a second wave of infections.
Despite the Fed’s reassurances of its full support to the markets during the crisis, investors chose to focus on the central bank’s pessimistic outlook of a 6.5% contraction in the country’s economy in 2020.
London’s stock and indices trading are now on course to record their first weekly losses of the last four weeks, with hopes of a faster economic recovery fading due to worries of the pandemic continuing. The FTSE 100 index’s decline for the fourth straight day marked its biggest losing streak in around three months.
Travel and leisure stocks were among the top losers on Thursday, with Carnival’s shares leading the decline on the FTSE 100 index. Carnival’s stock plummeted around 12%, with shares of EasyJet and Cineworld also closing lower in the previous session.
Unilever announced plans to create a single company by combining its UK and Dutch units, ditching its dual Anglo-Dutch structure to give itself more flexibility for deal making.
Amid weakening trading conditions, the FTSE 100 index declined by 4%, while the British mid-cap index declined 3.6% on Thursday, recording its worst session in around two months.
With 119 companies suspending, cancelling or lowered their dividend payments between March 17 and May 27, only around a third of AIM-listed (Alternative Investment Market) stocks are currently paying dividends to investors, and the number is expected to decline significantly following the renewed coronavirus fears.
What to watch: Markets may recover today from yesterday’s slump, with investors looking for entry points and CFD share trading opportunities. Investors will look out for the various economic reports scheduled to released by the UK today. The country is expected to release data on balance of trade, construction output, industrial production, manufacturing production, gross domestic product and goods trade balance.
The UK’s construction output, which fell 7.1% year-over-year in March, is expected to tumble 36.2% in April. Analysts expect industrial production to decline 19.3% in April, versus an 8.2% drop in March. Manufacturing production is also projected to tumble 19.9% in April. Britain’s GDP is projected to shrink 22.6% in May.
Investors will also continue assessing covid-19 infections in the country. The UK has so far reported 292,860 infections with 41,360 deaths.