London’s blue-chip index sank on Wednesday with energy and healthcare stocks weighing the most amid weaker oil prices and some unwinding of bets on the timeline of a coronavirus vaccine.
The FTSE 100 .FTSE was down 1%, with oil heavyweights BP PLC (BP.L) and Royal Dutch Shell (RDSa.L) among the top drags as oil prices plummeted on a surprise rise in inventories.
Losses on the export-heavy FTSE 100 were more pronounced than those on the domestically-inclined midcap index .FTMC, owing to recent strength in the pound.
Drugmaker AstraZeneca (AZN.L) also weighed, retreating further from record-high levels after the lead developer of its vaccine expressed caution on Tuesday about when it could be rolled out.
Turnaround specialist Melrose (MRON.L) tumbled 14% to the bottom of the FTSE 100 as it signalled it could cut jobs to combat the coronavirus-led downturn.
Sentiment was also dampened by a surge in global coronavirus cases past 15 million. Local stocks extended losses toward the end of the session, tracking a mixed open on Wall Street, though markets were watching for new U.S. stimulus measures.
“It’s a pause before you find out what’s next around the corner, (and eyes are now on) the United States to get some sort of extra stimulus package for that next leg higher,” said David Madden, analyst at CMC Markets in London.
The FTSE 100 has rebounded sharply from a coronavirus-driven crash in March, but gains have slowed since May due to concerns over how a post-COVID-19 economic recovery will play out.
A Reuters poll found Britain’s economy is expected to expand at its quickest pace in decades in the third quarter following a record plunge in the previous quarter, but a majority of the respondents said the outlook had not improved.
In domestic earnings-driven news, home improvement retailer Kingfisher (KGF.L) marked its best day since 1986, topping the FTSE 100 after it forecast a rise in underlying first-half profit.
European shares slid on Wednesday as escalating U.S.-China tensions and a surge in coronavirus cases dented sentiment after an EU-wide debt deal sent the region’s markets to four-month highs in the previous session.
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, July 21, 2020. REUTERS/Staff
Breaking a three-day winning streak, the pan-European STOXX 600 closed down 0.9% to post its sharpest one-day drop in a month.
Beijing said Washington had abruptly told it to close its consulate in the city of Houston, a move strongly condemned by China. In response, the Asian country is considering closing the U.S. consulate in Wuhan, a source said.
Energy stocks .SXEP took the biggest hit, down 2.8% after data showed a bigger-than-expected inventory build-up in the United States, adding to the pressure on oil prices. Royal Dutch Shell (RDSa.L), BP (BP.L) and Total SA (TOTF.PA) dropped more than 3%.
U.S. President Donald Trump warned overnight the pandemic would get worse before it got better, while a Reuters tally showed global COVID-19 infections surged past 15 million on Wednesday.
The news deflated the positive mood after European Union members reached a deal on Tuesday over a 750-billion-euro (683 billion pounds) coronavirus recovery fund to help with the bloc’s economic recovery from the virus outbreak.
“Markets... swing between despair at the mounting number of COVID-19 cases across the globe, and hope driven by financial stimulus and developments on a potential vaccine,” said AJ Bell investment director Russ Mould.
Healthcare stocks .SXDP marked their worst session in a month, while China-sensitive basic material stocks .SXPP lost 1.4%.
In earnings, UK home improvement chain Kingfisher (KGF.L) had its best day in more than three decades, up 14.6%, after it forecast first-half underlying profit ahead of last year.
Swiss engineering firm ABB Ltd (ABBN.S) rose 2.8% after saying its order situation could improve in the coming months.
Industrial group Melrose Industries (MRON.L), meanwhile, dropped 14.2% after it signalled it could lay off an unspecified number of employees following losses in the second quarter.
Automakers .SXAP were hit by a 1.3% slide in French car parts maker Valeo SA (VLOF.PA) after it swung to a 1.2 billion euros first-half loss.
Expectations for second-quarter corporate profits in Europe have further deteriorated, Refinitiv data shows, as fears grow over the extent of the recession triggered by the pandemic.
Companies listed on the STOXX 600 are expected to report a decline of 58.6% in quarterly earnings, versus 56.2% forecast the week before.