London’s FTSE 100 erased session gains to end at 10-week lows on Friday after Britain postponed the easing of a coronavirus-induced lockdown as cases surged, raising fears that a nascent economic recovery may reverse.
Just hours after imposing tougher measures on swathes of northern England, Prime Minister Boris Johnson announced that casinos, bowling alleys and skating rinks, due to reopen on Saturday, would remain shut for at least two more weeks.
“The UK’s move away from further easing of lockdowns... put bullish sentiment on the back foot, and further reduced the desire to move back into stocks at month end,” said Chris Beauchamp, chief market analyst at IG.
The FTSE 100 .FTSE ended down 1.5% after having gained as much as 1.7% during the day when upbeat earnings from British American Tobacco (BATS.L) and Glencore (GLEN.L) had lifted the index.
But both stocks later gave up gains, down 5% and 1.4% respectively, as sentiment turned.
The blue-chips index fell 4.4% in July, its first monthly fall since the coronavirus-driven crash in March, on fears that another round of shutdowns could cripple business activity.
While a worsening economic outlook has raised bets of more stimulus from major central banks, Britain’s central bank is expected to keep its policy unchanged when it meets next week.
British Airways-owner IAG (ICAG.L) tumbled 9% as it said it would raise about 2.75 billion euros ($3.27 billion) to strengthen its finances, while broadband and mobile operator BT Group (BT.L) dropped 8.6% after it laid out grim forecast for the year.
A strong sterling also weighed on internationally focused stocks on the FTSE 100.
The London Stock Exchange Group (LSE.L), meanwhile, rose 1.7% after reporting an 8% rise in first half profit and saying it may sell all or part of Borsa Italiana to help secure its $27 billion Refinitiv deal.
The mid-cap FTSE 250 .FTMC fell 0.5%, although a 21.5% surge for Pets At Home (PETSP.L) capped losses after it posted a smaller-than-feared drop in quarterly sales.
European stocks posted their first monthly decline since a market selloff in March on Friday as growing doubts over a global recovery from the coronavirus crisis overshadowed a batch of strong earnings from technology firms.
The pan-European STOXX 600 index gave up early gains to close 0.9% lower, pressured by a weak open for Wall Street as optimism from stellar earnings reports from big tech names Amazon (AMZN.O), Apple (AAPL.O) and Facebook (FB.O) faded.
An early reading of the euro zone’s economy showed the bloc shrank by a bigger-than-expected 12.1% in the second quarter, its deepest contraction on record as lockdowns ravaged business activity.
Spain's benchmark index .IBEX dropped 1.7% as the country posted the worst output slump, while GDP in Italy and France also fell sharply but less than forecast.
“Lockdown exits coupled with massive stimulus brought a strong rebound in activity during Q2, which supported the rally in equities, but recovery appears to be levelling off,” equity strategists at Barclays wrote in a note.
“Overall, choppy markets could continue due to elevated uncertainty, low conviction and tight summer liquidity.”
The STOXX 600 was down about 1% in July, with fears of a resurgence in COVID-19 cases also weighing on the mood as Britain imposed a tougher lockdown in swathes of northern England, while Spain saw a surge in new infections.
Technology stocks .SX8P were among the few gainers, up 0.7% after forecast-beating results from Wall Street’s tech majors on Thursday.
The top gainer on the STOXX 600 was Finnish telecom network equipment maker Nokia (NOKIA.HE), up 12.5% after reporting an unexpected rise in underlying profit as it reduced low-margin business.
“The strength of numbers from the ‘four horsemen of tech’ is leading to a halo effect for the tech sector and a resumption of growth stocks leading the market,” said Neil Campling, head of TMT research at Mirabaud Securities.