The FTSE 100 fell by 4 per cent today as the property market looks set to dry up during the key spring selling season.
The index of the UK’s biggest companies was trading down 232 points or exactly 4 per cent at 5,583 this morning, following three straight days of gains.
The fall is a reversal in fortunes for the FTSE this week which rose 2.2 per cent yesterday, taking increases in the past three sessions to 16.5 per cent – while, in the US, the Dow Jones was up more than 6 per cent on Wall Street yesterday.
Persimmon, Taylor Wimpey and Barratt Developments were all among the top ten biggest losers in London today, falling between 7 and 9 per cent.
Russ Mould, investment director at AJ Bell, an investment platform, said: ‘Just like other sectors of the economy, the housing market is going into hibernation.
THIS WEEK: The FTSE 100 had enjoyed three straight days of rises before falling this morning
‘It faces a double whammy – coronavirus containment measures make the practicalities of moving house almost impossible, and banks are withdrawing mortgage products at pace.’
He added that if big mortgages do not come back in the same way as before the crisis then housebuilders might have to start cutting prices.
Meanwhile Redrow, another construction firm, announced it was starting to close all of its sites and offices due to problems in its supply chain. Berkeley Group has suspended work where possible.
The FTSE was also dragged lower by cruise company Carnival, and Ashtead, which rents out construction equipment.
Property website Rightmove also dropped by around 7 per cent, putting it among the index’s worst performers.
Meanwhile, oil companies BP (down 7 per cent) and Shell (down around 5 per cent) suffered as the price of oil took a tumble, with the cost of a barrel of Brent crude falling 1.8 per cent to $25.88.
Fiona Cincotta, an analyst at City Index, said: ‘The FTSE has opened on the back foot, snapping three straight sessions of gains.’
But she said it still leaves the index on course for a gain of around 10 per cent since last Friday, its first week in the green since early February.
2020: The FTSE has lost about a quarter of its value since the outbreak intensified last month
She added: ‘The big question is whether this is a false floor or whether it is the start of a more meaningful advance.
‘The awful data is only just starting to show through. Chinese industrial profits slumped by the most on record. Italian and French consumer confidence is expected to plunge.’
Investors in Britain began to react today to a record rise in Americans claiming unemployment benefit as the pandemic hammered the world’s largest economy.
The US also now has the most confirmed cases of coronavirus of any country, with more than 85,500 positive tests – compared to 81,782 in China and 80,589 in Italy,
Nigel Frith, a senior market analyst at London-based AskTraders, told MailOnline today: ‘Whilst hopes of further US stimulus had boosted market morale on Tuesday, despite dire initial jobless claims figures, today the reality of the escalation of coronavirus cases in America is taking its toll.
‘However, losses have certainly slowed from earlier in the month. Investors are still showing nerves of holding positions over the weekend.
‘We will need to see more confidence is traders maintaining positions before any move higher can be sustained. Right now the fact is the data is awful.
Pedestrians wearing face masks pass a board for the Tokyo Stock Exchange in Tokyo today
‘Chinese industrial profits slumped by the most on record whilst data today is expected to show that consumer confidence plunged in Italy and France.
‘There is still a way to go until we can gauge the full extent of the damage – then we could start to see some more meaningful moves higher.’
Japan’s Nikkei index rose 3.88 per cent overnight, capping its biggest weekly gain on record. But Australian shares gave up gains to fall 5.3 per cent after a strong week.
The US House of Representatives is expected to pass a $2.2trillion stimulus package that will flood America with money to stem the damage caused by the pandemic.
The US Federal Reserve has already slashed rates to zero and launched quantitative easing. The Fed will also now offer a direct backstop for corporate loans.
Policymakers may need to offer more stimulus as the virus slams the brakes on economic activity and increases healthcare spending.
‘I’m not sure what measures are left, but the reaction in stocks shows some people hoping for more stimulus thought the market was a little oversold,’ said Yukio Ishizuki, FX strategist at Daiwa Securities in Tokyo, today.
Jay Woods, a US designated market maker with IMC and New York Stock Exchange floor governor, works yesterday in his home office in Basking Ridge, New Jersey
‘Currencies tell a different story. The dollar is the lead actor. The mad rush to buy dollars due to liquidity concerns is starting to fade.’
The number of Americans filing claims for unemployment benefits surged to a record of more than 3million last week as strict measures to contain the virus pandemic ground the country to a sudden halt, data showed yesterday.
The jobless blowout was announced shortly after Fed Chairman Jerome Powell said the US ‘may well be in recession’, an unusual acknowledgement by a Fed chair that the economy may be contracting even before data confirms it.
Global equity markets took the data in their stride, partly as most central banks have already aggressively eased policy and governments are backing this up with big fiscal spending.
Chinese shares, battered this month because of the virus, rose 0.32 per cent today. Shares in South Korea, another country hit hard by the pandemic, rose 1.87 per cent.
DOW JONES THIS WEEK: The Dow Jones was up more than 6 per cent on Wall Street yesterday
Leaders of the G20 major economies pledged yesterday to inject over $5trillion into the global economy to limit job and income losses from the coronavirus.
With fears over the health of the global economy intensifying, a United Nations official warned that the number of jobs lost globally due to Covid-19 would be ‘far higher’ than the 25million estimated just a week ago.
The deepening economic crisis fuelled speculation that governments and central banks around the world will take further action to support businesses and families hit by the pandemic – boosting share prices.
Quincy Krosby, chief market strategist at Prudential Financial in New Jersey, said if the jobs numbers continue ‘there will be demand for more fiscal support’.
Chancellor Rishi Sunak (pictured at Downing Street yesterday) has launched measures to protect the self-employed during the coronavirus outbreak
She said the rise in share prices suggested that investors ‘expect a larger stimulus package from the US government than the $2trillion agreed upon’.
In the UK, Chancellor Rishi Sunak launched measures to protect the self-employed.
In the US, Federal Reserve chairman Jerome Powell said the central bank was taking every action to support the economy.
But taking a different approach to President Donald Trump, who has said he wants the economy to be ‘roaring’ by Easter, Mr Powell said progress in controlling the spread of coronavirus would determine when business resumes.
In the US, Federal Reserve chairman Jerome Powell (pictured on March 3) said the central bank was taking every action to support the economy
‘We are not experts,’ he said. ‘We would tend to listen to the experts. The first order of business will be to get the spread of the virus under control and then resume economic activity.’
A record 3.3million Americans filed jobless claims last week – nearly five times higher than the previous high of 695,000 in 1982 and up from 282,000 the previous week.
And with nearly half the US’s population under some form of a lockdown, economists expect further increases in jobless claims.
Gregory Daco, chief US economist at Oxford Economics in New York, said: ‘We expect jobless claims will continue to climb as economic activity shuts down.’
Governments and central banks around the world have launched huge emergency packages to cushion the impact.
But a deep recession now looks inevitable as shops, factories and offices are shut down and people are told to stay at home.
The International Labour Organisation (ILO) – part of the UN – last week estimated that unemployment could rise by up to 25million worldwide due to coronavirus. By comparison, the 2008-09 global financial crisis increased global unemployment by 22million.
But Sangheon Lee, director of the ILO’s employment policy department, said: ‘The projection will be much bigger, far higher than the 25million we estimated.’