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(Alliance News) -Â London stocks were trading deep in the red at midday on Thursday, with the investment mood soured by a downbeat assessment of the US economy by the Federal Reserve and worries over a second wave of Covid-19 infections.
In a thin economic calendar on Thursday, traders will be watching US initial jobless claims at 1330 BST. It is expected 1.5 million Americans will have filed for unemployment in the week to June 6, according to FXStreet consensus, down from 1.9 million the week before.
The blue-chip FTSE 100 index was down 128.92 points, or 2.0%, at 6,200.21 midday Thursday - at this level down 4.4% since the week began.
The mid-cap FTSE 250 index was down 368.25 points, or 2.1%, at 17,237.21. The AIM All-Share index was down 1.5% at 874.37.
The Cboe UK 100 index was down 2.0% at 10,502.68. The Cboe 250 was down 2.5% at 14,818.51, and the Cboe Small Companies down 1.3% at 9,776.93.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both down 2.1% in early afternoon trade.
"Much like the British weather, a sunny start to June has given way to gloomy skies for the markets, the last few days crushing the optimism that had driven indices higher and higher," commented Connor Campbell, financial analyst at Spreadex.
"Coming hot on the heels of the OECD's own projections, the Federal Reserve revealed its economic forecasts on Wednesday night – and they didn't make for comfortable reading."
At the conclusion of its two-day meeting, the Fed's policy-setting Federal Open Markets Committee confirmed it will keep the benchmark interest rate at zero until the recovery is underway.
The Fed also released economic projections of FOMC members for the first time since December. Their median forecast is for the economy to contract by 6.5% this year, with unemployment falling to 9.3% by the end of the year from its current 13%.
Earlier on Wednesday, the OECD had forecast the US economy will shrink 7.3% this year, or as much as 8.5% if there is a second wave of Covid-19 infections.
The median forecast of FOMC members shows they expect the key rate to stay the same through 2022 at least, before edging back up near 2.5% over the longer term. Only two central bankers projected the rate would rise off zero in 2022.
Also adding to Thursday's risk-off mood were fears of a second wave of Covid-19 in the US, with Texas, Florida and California reporting spikes in new infections.
"Jumps in new daily cases were spotted in some of the US states like Texas and immediately sparked concerns of a potential second round of infection in the country, inevitably impacting market sentiment towards riskier assets. Of course, there must be many more signs of a potential second wave before this scenario becomes a real possibility by traders," said Pierre Veyre, technical analyst at ActivTrades.
Wall Street is set for a slump at the open. The Dow Jones is called down 1.8% and the S&P 500 down 1.4%, while the Nasdaq is seen off 1.1%.
The dollar was broadly weaker on Thursday.
The euro traded at USD1.1384 at midday, firm versus USD1.1343 late Wednesday. Against the safe haven yen, the dollar was quoted at JPY106.94, lower than JPY107.20.
However, the pound slipped to USD1.2692 on Thursday, lower than USD1.2760 at the London equities close on Wednesday.
The EU's chief negotiator is "inclined to move" on key areas in Brexit talks, Michael Gove has claimed.
The UK Cabinet Office minister told members of Parliament that Michel Barnier has indicated progress can be made on fisheries and state aid, among other issues. But some EU member states have been a "little more reluctant", he added.
Gove insisted Britain will "under no circumstances" accept an extension to the Brexit transition and played down reports of a rift between himself and Prime Minister Boris Johnson.
Gold was priced at USD1,732.11 an ounce midday Thursday, higher than USD1,716.28 on Wednesday as the week's risk-off mood persisted and boosted the safe haven metal. Brent oil was trading at USD40.48 a barrel, lower than USD40.70 late Wednesday.
In London, travel-exposed stocks slipped on fears of a second Covid-19 wave. Cruise operator Carnival was down 8.5%, British Airways-owner International Consolidated Airlines down 5.5% and easyJet down 4.5%.
Ocado was down 5.6% after 1,960.50 pence after raising GBP1.01 billion from its placing, retail offer and bond offer.
Ocado placed 33.2 million shares at a price of 1,960p each, with retail investors subscribing via the PrimaryBid platform for another 362,000 shares at the same price. Together, the fundraise comprised 33.5 million shares, generating gross proceeds of GBP657 million.
The placing price represents a 5.7% discount to the company's closing price of 2,079p on Wednesday in London, giving it a market capitalisation of GBP14.85 billion.
On top of the placing, Ocado has priced a GBP350 million bond offer of guaranteed senior unsecured convertible bonds due 2027 at 0.75% per annum. The online grocer said the bonds will be converted into shares at GBP26.46 each, representing a 35% premium to the placing price.
Centrica shares dipped 1.5% after revealing plans for a "significant" restructure, leading to a reduction of around 5,000 roles, to create a simpler, leaner company.
The Windsor, England-headquartered energy services provider said it intends to have fewer customer-facing business units, all of which will report directly to the chief executive. As a result of these changes, the company said around half of the current 40 senior leadership team members will leave the company by the end of August.
Centrica said the revised operating model is expected to accelerate the delivery of targeted cost savings and lead to a reduction of around 5,000 roles across the company, with over half of the departures expected to come from management layers.
In the FTSE 250, B&M European Value Retail was down 8.8% despite posting an increase in profit.
The discount shop chain said pretax profit for the 52 weeks ended March 28 grew by 3.2% to GBP252.0 million compared to GBP244.3 million reported a year earlier, as revenue increased by 17% to GBP3.81 billion from GBP3.27 billion.
Looking ahead, B&M said its trading since the end of its most recent financial year has been "strong".
Elsewhere in London, CMC Markets shares rallied 17% as annual profit soared.
In the year to March 31, total revenue in the year to March 31 rose 80% to GBP298.1 million from GBP166.0 million the year before, with pretax profit surging to GBP98.7 million from just GBP6.3 million.
Net operating income - so revenue excluding introducing partners commissions and levies - jumped 93% to GBP252.0 million from GBP130.8 million.
CMC will pay a dividend of 15.03p per share, multiplied from 2.03p. It was after it recommended a final dividend of 12.18p, itself a sharp rise from 0.68p, at a time when investors have been starved of payouts as companies save cash during the Covid-19 pandemic.
The market volatility caused by the health crisis has given CMC a boost. Contract for difference gross client income at the start of the new financial year has risen by "around double" annually.
By Lucy Heming;Â lucyheming@alliancenews.com
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