Last checked at 
(Alliance News) - Stocks in London ended sharply lower on Wednesday amid fears about a second wave of coronavirus cases which could lead to renewed curtailment of business activity.
New coronavirus cases have risen in many US states, with Arizona, Texas and California reporting daily records of infections on Tuesday.
Epidemiologists define a second wave as a sustained rise in infections having been initially brought under control with a drop in cases in the first instance.
The FTSE 100 index closed down 196.43 points, or 3.1%, at 6,123.69. The FTSE 250 ended down 501.97 points, or 2.8%, at 17,150.83, and the AIM All-Share closed down 10.11 points, or 1.1%, at 886.35.
The Cboe UK 100 ended down 3.1% at 10,371.44, the Cboe UK 250 closed down 3.0% at 14,688.01, but the Cboe Small Companies ended down 2.4% at 9,475.38.
In Paris the CAC 40 ended down 2.9%, while the DAX 30 in Frankfurt ended 3.4% lower.
"Equity markets [ended] deep in the red as health concerns are weighing on sentiment. Yesterday's update from Dr Anthony Fauci, a health advisor to the US government, spooked traders as he described the increase in Covid-19 cases in some US states as 'disturbing'. The statement comes as certain US states, such as California, have seen an increase in the infection rate, which is a result of loosening lockdown restrictions. The medical expert wasn't extremely pessimistic as he added there might not be a need for a total lockdown," said CMC Markets analyst David Madden.
On the London Stock Exchange, Russian gold miner Polymetal International ended as the best blue-chip performer among a handful of stocks to close in the green, up 0.5%, tracking spot gold prices higher.
Gold was quoted at USD1,775.65 an ounce at the London equities close, up from USD1,765.19 late Tuesday. Bullion hit an intraday high of USD 1,779.33 - its highest level since 2012.
At the other end of the large-cap index, stocks sensitive to the outlook for global travel ended in the red, with International Consolidated Airlines down 8.5%, Rolls-Royce down 5.5% and InterContinental Hotels down 4.9%.
"Chief losers come in the form of the often targeted travel sector, with IAG, Rolls-Royce, and InterContinental Hotels all heavily lower. While we are looking at a potential surge in demand for travel in the month ahead, experiences in the US do raise fears that we could see a similar pressure on the health service, leading to a second bout of lockdowns in Europe," said analysts at IG Group.
In addition, Kingfisher and Next closed down 6.1% and 5.7% respectively after Citigroup downgraded the retailers to Sell from Neutral.
In the FTSE 250, easyJet closed down 6.0% after the budget airline said its pretax loss for the six months to March 31 widened to GBP353 million from GBP272 million last year. The carrier decided against providing financial guidance for financial 2020 due to the coronavirus uncertainty. It also announced a share placing to raise between GBP400 million to GBP450 million to bolster its balance sheet.
The pound was quoted at USD1.2427 at the London equities close, down sharply from USD1.2526 at the close Tuesday.
The International Monetary Fund projects a 4.9% slump in the global economy for 2020 due to the bruising Covid-19 crisis, it said in its updated World Economic Outlook. The latest prediction is 1.9 percentage points below April's forecast.
The UK is expected to shrink 10.2% in 2020, on par with the eurozone. Within the single currency bloc, powerhouse Germany is set to record a 7.8% slump in 2020, while France, Italy and Spain are all set to register falls in excess of 12%.
The UK should bounce back 6.3% in 2021, while the eurozone should grow 6.0%.
Elsewhere, US GDP is predicted to fall 8.0% in 2020, while Chinese GDP should grow 1.0%. In 2021, the US economy should recover 4.8% and the Chinese economy expand 8.2%.
Rupert Thompson, chief investment officer at wealth manager Kingswood, said: "The IMF's latest projections for world growth should temper some of the optimism fuelled yesterday by the larger than expected bounce in business confidence in June shown by the Purchasing Manager Indices in the US, UK and Europe. The IMF now expects the world economy to contract 4.9% this year, significantly more than the 3.0% fall forecast back in April.
"It has also scaled back the rebound in growth forecast for next year to 5.4%. Output in the advanced economies is expected by the end of next year to remain below the levels at the start of last year. The IMF forecasts, along with the recent pick up in Covid-19 infections in China, Germany and the US, leave the assumption of a smooth and rapid rebound in economic activity which has underpinned the recent strong gains in equities, looking all the more questionable."
The euro stood at USD1.1263 at the European equities close, down from USD1.1298 late Tuesday. Against the yen, the dollar was trading at JPY106.44, firm from JPY106.37 late Tuesday.
Stocks in New York were lower at the London equities close as the US signalled possible new tariffs on European goods and coronavirus cases continued to climb in many states.
The DJIA was down 2.0%, the S&P 500 index down 1.8% and the Nasdaq Composite down 1.5%. The Nasdaq Composite index set its 21st closing record for 2020 on Tuesday.
The US is considering levying taxes on an additional USD3.1 billion in European imports amid a dispute over subsidies to planemaker Airbus. A document released on Tuesday from the US Trade Representative listed products from France, Germany, Spain or Britain, ranging from olives to decaffeinated coffee, as possibly subject to the new tariffs.
Washington and Brussels have been at odds for years over government subsidies to Airbus, with US President Donald Trump's administration imposing USD7.5 billion in punitive tariffs with the authorisation of the World Trade Organization.
The EU has threatened its own tariffs on Boeing, but in an April letter to USTR Robert Lighthizer, EU Trade Commissioner Phil Hogan said he saw the coronavirus pandemic as an opportunity to defuse the tensions.
Meanwhile, public health officials are growing increasingly worried about higher coronavirus counts in many states in the southern and western US.
In Texas, which had been among the most aggressive states in reopening, Governor Greg Abbott told a television interview that the "safest" place was home unless people had to go out.
Brent oil was quoted at USD40.44 a barrel at the London close, down sharply from USD43.58 at the close Tuesday, amid Covid-19 fears.
"The price is naturally highly sensitive to the risk of more lockdowns, despite the best efforts of producers to bring the market back into balance. I don't think we're yet at the stage where this risk becomes reality and governments will likely take a far more targeted approach, but it will likely continue to weigh," said OANDA analyst Craig Erlam.
The economic events calendar on Thursday has first-quarter US GDP readings, jobless claims and personal consumption expenditure figures at 1330 BST. Financial markets in Hong Kong and Shanghai are both closed on Thursday for the Dragon Boat Festival holiday.
The UK corporate calendar on Thursday has annual results from digital automotive platform Auto Trader Group and postal operator Royal Mail.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
