Rising covid-19 numbers in China, the aftermath of last week’s Capitol Hill riots, and fears of further lockdown measures in the UK firmly put New Year cheer to bed on Monday.
Initially opening unchanged, the FTSE quickly unravelled as the session progressed, dropping 1% as Rishi Sunak warned that the economy will ‘get worse before it gets better’. This meant his suggestion of a post-Brexit ‘Big Bang 2.0’, echoing the sweeping deregulation of the Thatcher era, fell on deaf ears.
Coming alongside the blue chip index’s fall was a 1.1% slide from the FTSE 250, and a half a percent decline for cable, though the pound did manage to reverse its early losses against the euro.
Monday’s fearful trading wasn’t isolated to the UK. The DAX was down 100 points, just about hanging on above 13,900, while after an opening spurt higher the CAC dropped 0.6% to 5,650.
In the position of defending its recent all-time highs, and without any scheduled news events to help led a wave of positive sentiment, the Dow Jones slipped under that 31,000 milestone. With the index down 0.4%, investors expressed a certain level of hesitation regarding the tinderbox political situation stateside, as well as a fairly natural reaction to a 2021-opening week full of fresh peaks.
It very much feels this Monday like the hangover to last week’s New Year’s party. What will be crucial for the markets is to see whether they can bounce back like a giddy fresher ready for more, or whether they are facing, like an overindulged 30-something, a 5-day headache.
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