Shares in London dropped by more than 1 per cent today after Rishi Sunak confirmed plans for the state to top up the wages of workers forced to cut their hours due to the coronavirus pandemic.
The FTSE 100 index of Britain’s biggest companies ended down by 1.3 per cent or 76 points at 5,823 this afternoon.
The market had initially dived by a similar level in early trading following falls in Asia and overnight on Wall Street, before regaining some ground by lunchtime then dropping again later on before the close.
This morning in New York, the Dow Jones was roughly level at 26,795, swinging up and down in the latest erratic moves for a market dominated by volatility this month.
Meanwhile in London this afternoon, the Chancellor warned the resurgence of Covid-19 posed a threat to the UK’s ‘fragile’ economic recovery.
FTSE THIS WEEK: The FTSE closed down at 5,824 today as its topsy-turvy week continued
As part of a package of measures, Mr Sunak said the new jobs support scheme was aimed at protecting ‘viable’ roles rather than all posts which have been kept going as a result of state support under the furlough programme.
Under the terms of the new scheme, the Government will top up the wages of people working at least a third of their normal hours.
They will be paid for that work as normal, with the state and employers then increasing those wages to cover two-thirds of the pay they have lost by working reduced hours.
He also extended the self-employment income support scheme and 15 per cent VAT cut for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.
FTSE THIS YEAR: The stock market has taken a massive hit this year amid the Covid-19 crisis
Today’s falls on the FTSE followed a sharp sell-off in the US amid concerns over stalling stimulus talks and election uncertainty in America.
As the number of new cases rose by more than 6,000, new restrictions came into force in England today, and the much-delayed coronavirus contact tracing app was finally launched.
Mr Sunak’s intervention comes after increasing pressure from business groups, MPs and unions to extend the furlough scheme amid fears the new restrictions will damage the economy.
Number 11 said work on the scheme had been taking place in parallel with Budget preparations with a focus on jobs to avoid the expected three million unemployed.
A currency trader talks on the phone at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, today as stock markets in Asia also fell overnight
Months of huge gains in global equities have halted this month, with expectations that the wall of cash from governments and central banks would jumpstart a rebound quickly fading.
Lauren Goodwin, at New York Life Investments, said: ‘Markets are digesting and grappling with this idea that the growth expectations that investors have might not materialise.
‘As the fiscal impulse in the US starts to wane, some of these expectations for a slow and steady recovery are shaken.’
And with the northern hemisphere now moving into autumn and winter, there are worries that a second wave of Covid-19 will see the reimposition of strict, economically devastating containment measures.
DOW JONES THIS WEEK: The falls in London this week have been mirrored on Wall Street, although this morning in New York, the Dow Jones was roughly level at 26,795
France became the latest European country to act, shutting bars and restaurants in the second-biggest city Marseille and putting it on ‘maximum alert’, while several others including Paris will see new restrictions, including limitations on public gatherings and earlier closing hours for bars.
The UK government has also shortened opening hours and has warned of other measures while the Madrid region has locked down roughly 850,000 people and plans to extend the measures.
The International Labour Organization found that by mid-year, global working hours had declined 17.3 per cent from December – equivalent to nearly 500 million full-time jobs, which its chief Guy Ryder called ‘catastrophic’.
US traders are now growing concerned that rising infections at home could see similar moves, and several Federal Reserve officials including boss Jerome Powell have called for a new stimulus to mitigate the impact.