FTSE 100 falls expected as traders ignore Microsoft surge to focus on European Covid fears

Jim Armitage
·3 min read
<p>Paris streets deserted amid Covid lockdown rules</p> (REUTERS)

Paris streets deserted amid Covid lockdown rules

(REUTERS)

The FTSE 100 Index was set to fall today as investors in Europe feared further Covid lockdowns that would hold back economies and company profits in the region.

As Portugal became the world’s most infected country per capita with the virus, investors are waking up to the horrific implications of the new Kent variant, having seen it trigger huge case surges in the UK and then Ireland.

Scenes of rioting in Holland over lockdowns have given further fuel to the bears on European equities, leading shares across the UK and the EU set for a muted start to trading.

The FTSE -100 was being called down 20 points at 6640 by IG Index traders with similar falls registered on CMC Markets. The latter were calling the Dax in Germany down 11 at 13860 and France’s CAC-40 up 5 at 5528.

Such small moves could always veer into positive or negative territory by the time trading starts but were clear indications of investor caution. Yesterday saw markets gain after three straight declines.

Wall Street had a fairly flat session - meaning it remained near record highs. After the market closed, Microsoft issued blockbuster profit figures, smashing expectations on Wall Street as its Intelligent Cloud AI technologies and its web hosting software Azure saw a big rise in revenues from businesses.

CMC Markets analyst Michael Hewson said that “raises the bar” for Apple and Facebook’s earnings later today.

Asia was lifted by Microsoft’s mood this morning but Europe’s Covid troubles seem likely to outweigh that.

The question on many people’s minds is whether the US tech stock rampage can continue at current levels. Fuelled by a surge in retail investors, as well as fundamentals such as the Federal Reserve’s super-easy monetary policy, markets there are soaring.

There are concerns that they are underplaying drastically the impact of Covid in the nation. While case numbers are falling currently, new cases of the aggressive Kent version of the virus have been found in multiple states.

Given the chaos it reaped in the UK, Ireland and now Portugal, and the fear it has wrought on the rest of Europe, bears are concerned the US could be in for a far harder few months ahead than the markets are bargaining for.

Today sees the first Federal Reserve meeting of 2021, with all investors waiting for news on the monetary policy makers’ views on the US outlook. At the last meeting, they were slightly more upbeat about US GDP and unemployment in the medium term although concerns remained about the nearer outlook.

Since the December meeting, some members appear to have turned more hawkish, which has left some economists fearing a premature move to end the easy monetary policy that has kept businesses afloat during the pandemic. Memories of the last time they attempted to tighten will doubtless be part of the conversation - the so called “taper tantrum” that smashed markets - is likely to stave off such a move.

AstraZeneca chief executive Pascal Soriot last night addressed convincingly some EU policymakers’ more absurd complaints about rollout of the Oxford vaccine last night.

Soriot slapped down talk that Astra was profiteering by denying the EU of its due vaccines, reminding the world that it is operating on a not-for-profit basis. He said delays in the production of the vaccine for the EU were simply because the bloc had been three months later than the UK in ordering it. In that time, it had ironed out potential hiccups to the supply chain in the UK, he insisted.

He also repeated Astra’s strenuous denial of the German newspaper reports claiming the vaccine had only 8% efficacy in older patients. The story is plainly wrong, and providing dangerous fuel to anti-vaxxers, but the paper, Handelsblatt appears to be refusing to climb down.