France shuts down
Markets fall as lockdowns loom across Europe
Traders around the world have been selling
Financial markets went into freefall around the world as a sharp rise in coronavirus cases swept across Europe and threatened to scupper tentative economic recovery from the first wave.
France will go into a second national lockdown from Friday and Germany and Spain are also facing tighter restrictions as cases of Covid-19 return to figures last seen in the spring and put pressure on intensive care facilities.
In the UK, Prime Minister Boris Johnson is facing the prospect of imposing another national lockdown as cases rise. The UK reported 24,701 new cases on 28 October.
European markets plummeted, with the FTSE 100 falling more than 200 points before pulling back to end the session at 5,582.8, down 146.19 (2.55%). The German DAX was 4.2% lower. France’s CAC 40 index dropped 3.4%.
The FTSE 100 fell sharply
French president Emmanuel Macron, confirming that the new lockdown would apply for the whole of November, said that “France could never standby and see hundreds of thousands of its citizens die.”
Mr Macron said people would only be allowed to leave home for essential work or medical reasons. Non-essential businesses, such as restaurants and bars, will close, but schools and factories will remain open.
In Germany, all bars, restaurants, theatres and cinemas will close from Monday.
Chancellor Angela Merkel said it was necessary “to act, and now, to avoid an acute national health emergency”.
Protesters took to the streets of Berlin to demand more support for the government. There have also been anti-lockdown demonstrations in Spain and Italy.
At 7pm GMT the three leading US indexes were down almost 3%.
Laith Khalaf, financial analyst at AJ Bell, said: “It’s surprising it’s taken markets this long to take fright at the second wave of the pandemic, and the havoc it might wreak on the global economy. The writing has been on the wall for several weeks now, but stock markets have had their blinkers on.
“Even the mighty US stock market, which has reached record highs in the face of a global economic slowdown, finds itself in the red. This is a broad sell-off, with almost no stocks in the market making positive ground.
“Until the virus is contained, there can be no clear direction for markets in the short term. We can expect sharp sell offs and relief rallies in line with the ebb and flow of the virus, and the unfolding economic damage it leaves behind.
“So far corporate earnings have held up relatively well considering the challenging backdrop, but what remains to be seen is the longer term effect of social restrictions on the global consumer economy, and how that feeds into company profits.
“Unlike the US market, which is coming off a record high, the Footsie is around 25% below its pre-pandemic level. That means a fair amount of bad news is already baked into prices, though clearly things may yet get worse before they get better.”