The FTSE 100 continues to drop in value after losing 4.05 per cent on 19 March 2020 after oil prices plunged to their lowest levels in 18 years and the pound (GBP/USD) ended the session 4 points down as investors continue to pour capital into the US dollar as a potential cash haven in the midst of the coronavirus crisis.
The index, which carries a significant number of oil and gas, financial, and industrial companies, is highly exposed to the effects of both the coronavirus and the recent Russia and Saudi Arabia oil war triggered by Saudi Crown Prince Mohammad Bin Salman’s decision to ramp up the country’s oil production by nearly three million additional barrels per day.
Global markets continue spiralling in a so-far-endless downward crash that has put regulators in a difficult position, with many European countries already announcing extreme measures and policies to avoid a significant blow to their domestic economies.
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Throughout the following article we will analyse the performance of the FTSE 100 over the last few months and we will also take a look at the key drivers that have been affecting the valuation of its constituents.
FTSE 100 overview & analysis
The FTSE 100 is currently composed of 101 European stocks with the most important industries in the index being oil & gas (12.78 per cent), personal & household goods (12.20 per cent), banks (11.49 per cent), and health care (11.20 per cent).
So far, the index is accumulating a -27.15 per cent one-year return while the FTSE 100 monthly performance by 18 March 2020 is currently sitting at -31.87 per cent.
Ever since the coronavirus outbreak started to affect global markets on 20 February, the index has lost 32 per cent of its value, with travel & leisure stocks such as Carnival and easyJet leading the charge as its worst performers.
Furthermore, the most recent drop in oil prices due to Saudi Arabia and Russia’s decisions to increase production levels have also sent BP and Royal Dutch Shell shares down as the world plunges into a potential oil crisis that may swipe the entire profits of these businesses for the following quarters.
On a positive note, large retailers seem to be benefiting from increased revenues resulting from nervous purchases by anxious consumers who are following quarantine protocols and stay-at-home policies throughout Europe.
FTSE 100 latest news for March 2020
A long-term FTSE 100 market overview indicates that the index touched a 10-year low after closing the session at 5,080.58, a level that the index had only come across within this period in mid 2011.
Additionally, the most important news on FTSE 100 in March 2020 included a recent announcement from European countries where they explained certain extreme measures being taken to avoid a potential economic recession.
In this regard, the UK has taken the lead by pushing a £330 billion economic stimulus package aimed to help businesses in surviving the crisis through government-backed loans along with £20 billion in handouts that are supposed to go to individuals who are struggling to make ends meet.
While these measures should have prompted a rebound in the stock market, their effect only lasted a few hours, as the sell-off continued since investors fear these packages may not be enough to contain the fallout that massive quarantines, interrupted trade operations, and halted traveling activities could have in the European economy.
France has also taken a step further to protect its economy after a €45 billion package was approved on 17 March to help small businesses and other economic sectors that have been severely affected by the virus. The government is also expecting an increase in unemployment benefits expenditures that could amount to nearly €8.5 billion plus additional aid to those who are self-employed (€2 billion).
Furthermore, following this trend of economic stimulus, the European Central Bank headed by Christine Lagarde failed to meet analysts’ expectations of further interest rate cuts – instead, the central bank decided to expand its asset purchase programme by €120 billion to continue freeing capital from banks’ balance sheets to promote lending during this stressful situation.
Lagarde also prompted regulators and governments to step, saying: “Governments and all other policy institutions are called upon to take timely and targeted actions to address the public health challenge of containing the spread of the coronavirus and mitigate the economic impact.”
FTSE 100 news: COVID-19 recession fears drive UK 100 lower
So far, Italy, Spain, Germany, France, the UK, and Switzerland accumulate a total of 77,684 confirmed COVID-19 cases, which represents more than a third of the total number of cases worldwide.
In the eurozone, Italy is only second to China in the total number of cases. Italy has 35,713 confirmed cases followed by Spain with 14,769.
The fact that there’s such a heavy concentration of cases in this geographical area makes European stocks and indexes such as the FTSE 100 highly sensitive to the evolution of the coronavirus outbreak in the region.
While governments are advancing in implementing quarantine protocols, containment measures, and economic stimulus packages, investors fear that a global recession may start affecting a European economy that’s already embattled by negative interest rates, unemployment, socio-economic issues, and political issues such as Brexit.
Neil Wilson from Markets.com weighed in on the matter of stimulus packages, saying: “The fact that markets keep shrugging off the stimulus measures reflects the deep uncertainty about the economic damage about to be done.”
FTSE 100 news in March 2020 appears to indicate that euro governments are coordinating efforts to contain not just the virus, but also the economic blow that comes with it, even though they were not probably expecting that this fallout would be accompanied by the rather inopportune oil war that Saudi Arabia started only a few days ago.
Stock markets continue to tumble day after day and it is unclear if the size of these packages is large enough to compensate for the losses, especially those from the leisure and travel industry, which generates a significant volume of employment for most countries.
Still, a crashing stock market doesn’t mean a lack of opportunities for traders. Buying the dips could have been a profitable trading strategy amid the volatile stock markets. With contracts for difference you can benefit from both upward and downward market price movements. Follow the major UK 100 news and stock market analysis with Capital.com to spot the best trading opportunities.