FTSE 100 treads water in nervy trading session

STOCK MARKETS were desperately seeking reasons to be cheerful today as fears over Brexit, the highly infectious new strain of Covid-19 and the knock-on effect on world economies took their toll on investors.

The S&P closed lower on Monday, just as Tesla joined the index, and Asian shares widened losses on Tuesday, leaving the FTSE 100 in London treading water.

With British travellers still banned from entering 40 countries amid reports that 900 lorries are stranded at Dover sentiment was starkly negative.

The FTSE 100, which lost 112 points to 6416 on Monday, edged up 18 points to 6444 on Tuesda. It is up from a low of 4999 on March 23, but appears to be limping towards the end of the year.

CMC Markets UK analyst David Madden said: “It is bad enough that large portions of Britain will have to deal with harsher restrictions because of the fear surrounding the fast spreading strain of the coronavirus, but now many countries are distancing themselves from the UK. The isolation treatment the UK is receiving has rocked market confidence all over Europe.”

Sterling rallied somewhat.

Neil Wilson at markets.com said: “Sterling recovered, with GBP/USD rising above 1.34 again having briefly taken a 1.31 handle yesterday amid concerns of a no-deal Brexit and short-lived fears the country was being cut off from Europe due to the new strain of the coronavirus. It was a storm in a port but highlights market sensitivity to trade vis-a-vis Brexit trade disruptions and shows that we are far from out the worst of the coronavirus.”  

Asian shares widened losses on Tuesday, extending a pullback from multi-year highs hit last week on fears a highly infectious new strain of COVID-19 that hit Britain could lead to a slower global economic recovery.

Stephen Innes, Chief Global Market Strategist at Axi, said: “An escalation of European COVID-19 restrictions in response to fears around a new variant, which is supposed to be faster spreading, should, and did, of course, elicit a negative reaction from prices via the near-term global growth impact.”

“Illiquid conditions will persist through year-end, but dips like this could present more of an opportunity to fade than anything else,” he said.

European shares on Monday had their worst session in almost two months. Sentiment continue to sour with FTSE futures down 0.14% and E-mini futures for the S&P 500 index off 0.29%, even as the U.S. Congress on Monday approved a long-awaited $892 billion coronavirus aid package.