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Mixed signals leave stock markets struggling for direction

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3-min read
A stop sign is pictured at the Toennies meatpacking plant
A fresh outbreak of COVID-19 cases has been traced to the Toennies meatpacking plant in Rheda-Wiedenbrueck, Germany. (Martin Meissner/AP)

Stocks struggled for direction on Monday, amid mixed signals about the COVID-19 pandemic.

The FTSE 100 (^FTSE), DAX (^GDAXI), and CAC 40 (^FCHI) all dropped over 1% at the open. The worst hit was the CAC 40 in Paris, which fell around 1.5%.

All three indexes had recovered by mid-morning in Europe to trade in the green but drifted back into losses by the afternoon.

The FTSE 100 ended down 0.7%, the DAX closed down 0.5% and the CAC 40 lost 0.6%.

“Investors continue to be pulled from different directions by various headwinds and tailwinds,” said Russ Mould, investment director at stockbroker AJ Bell.

“On one hand there is positive news such as Spain accepting UK tourists without the need for quarantine, adding to the list of restrictions being lifted across Europe.

“On the other hand, the US still seems to be struggling to contain the coronavirus and the risk of a second wave is still front of mind for many people.”

The US recorded 24,800 new COVID-19 cases on Sunday. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said the US is “on course for five million [COVID-19 cases] by the third week of August, and 10 million by mid-October, in the absence of drastic changes in either public policy and/or people's behaviour in the states where cases are rising.”

Germany is also dealing with a fresh spike in new cases, linked to an outbreak in a major meat processing factory.

China continues to tackle an outbreak in Beijing, where schools have been closed and people have been asked to work from home.

“The virus spread continues to create a lot of uncertainty in markets,” Jim Reid, a strategist at Deutsche Bank, said. “For example, does it matter that the troublesome US states are continuing to see case numbers increase or does it provide some good news that economies can stay open as cases rumble on?”

Global confirmed cases look set to soon pass nine million, while deaths stand at 468,331 according to John Hopkins University.

US futures had pointed to a positive open, but major markets opened lower in New York.

The S&P 500 (^GSPC) was up 0.1% by the time European markets closed, while the Dow (^DJI) was flat and the Nasdaq (^IXIC) rose 0.5%.

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Asian markets were weak overnight. Japan’s Nikkei (^N225) slipped 0.1%, the Hong Kong Hang Seng (^HSI) slipped 0.7%, the Shanghai Composite (000001.SS) closed flat, and the Shenzhen Component (399001.SZ) rose 0.2%.

In London, travel stocks came under pressure. Continued outbreaks of COVID-19 make the prospects of a revival for the battered holiday sector even slimmer.

British Airways-owner IAG (IAG.L) slipped 4.6% and InterContinental Hotel Group (IHG.L) dropped 3.3%. Carnival (CCL.L) fell 10% after cancelling all its cruises until at least 30 September.

Glencore (GLEN.L) closed down 3.3%, after investors reacted to news of a Swiss criminal probe into an alleged failure to prevent corruption in the Democratic Republic of Congo, where Glencore has business dealings. The investigation was disclosed after markets shut on Friday.