Shares staged steep falls today as pessimism from economists brought the FTSE’s recent rally to an end.
Banking stocks took a particularly large hit as forecasts from the World Bank that the global economy will contract by 5.2% in 2020 took the wind out of traders, who had ridden a wave of optimism about relaxing lockdown restrictions.
The FTSE 100 closed 136.87 points lower at 6,335.72p.
David Madden, market analyst at CMC Markets UK, said: “In the past few weeks stocks have been broadly pushing higher as governments have been slowly unwinding their lockdown restrictions.
“Dealers shrugged off the terrible economic indicators that were released recently as they just focused on the reopening of economies, but now it seems they are facing up to the harsh reality of the situation.”
The major European markets all closed in negative territory as weak production data in Germany also weighed on sentiment.
Connor Campbell, financial analyst at Spreadex, said: “The optimism that defined much of May and the start of June was nowhere to be found on Tuesday, the markets retreating from their recent highs as German exports fell off a cliff.”
The German Dax decreased by 1.42%, while the French Cac moved 1.55% lower. Across the Atlantic, the Dow Jones dropped after the bell as the rally, which drove the index to a 15-week high at the end of trading on Monday, failed to continue.
A disappointing trading update from British American Tobacco also hit sentiment.
BATS held on to its dividend guidance but warned sales and earnings would be hit by continued lockdowns in key markets like Argentina and South Africa.
Shares fell 3%, making it one of the biggest fallers on the FTSE-100.
Likewise travel stocks tanked. EasyJet lost 6%, British Airways' owner IAG was down 6%.
Meanwhile housebuilder Bellway weighed on the blue-chip index, falling 4%, following its announcement it had sold fewer homes. It warned of a nasty hit to new reservations and said that wouldn't ease until further lockdown restrictions did.
All in all investors decided the recent rally had run out of steam.
Things fared little better on the FTSE 250 which was off over 2%, with WH Smith providing a lot of that drag as it dropped close to 5%.
