The FTSE 100 has recorded its worst week since the end of October as concerns mounted about the economic downturn from severe global closure measures.
The UK stock market index fell by 138 points compared to last week, a fall of about 2% to 6,745, after official figures showed the British economy was close to the double-digit recession in November. After a strong starting of the year, rising about 6% since the beginning of January, performance has been the worst weekly decline of the FTSE 100 since last October as England faces a second national shutdown.
Increasing Restrictions Globally
It is also worrying as more and more steps are being taken to impose lockdowns in Germany, France and China, with an increase in coronavirus diminishes the hopes that the economy will recover faster by early 2021.
The home-based FTSE 250 index, which follows the number of major 250 firms outside the FTSE 100, fell by 2.2% per week, in its worst performance since the beginning of December.
Economic Factors
The UK economy fell 2.6% in November, the National Bureau of Statistics said on Friday, as Britain’s second closure pushed the country closer to a double-digit recession and slowdown – described as- two recessions separated by a small gap – at the end of 2020.
Mining companies were among the biggest hit in the FTSE 100, Anglo American fell by almost 6% on Friday. Markets across Europe also ended the week low, with German Dax losing 2% and French Cac falling 1.9%.
With many countries imposing long-term restrictions on Covid to contain viral recovery before the drugs are fully used, financial markets have fallen in recent days after rising in early 2021 amid hopes that jabs could help revive the economy quickly.
Markets have also rallied in anticipation of further financial support for American businesses and workers from the forthcoming Joe Biden presidency, in the hope that this could encourage rapid growth in the world’s largest economy. Biden presented a $ 1.9tn (£ 1.4tn) coronavirus proposal on Thursday. However, stock markets have already risen in the last few weeks awaiting the plan, with some analysts expecting the Republic’s opposition to some of the measures to reduce the final size of the incentive package.
Russ Mould, investment director at the Manchester-based stockbroker AJ Bell, said: “Financial markets have already priced in the good news and are now starting to worry about the negative side, namely how it will be funded.
“The large scale of the proposed support measures adds fuel to the fire that taxes and interest rates will have to go up. Both have negative connotations for equities, therefore casting a cloud on the ability for stock markets to keep rallying at the same pace they have enjoyed for much of 2021.”
