UK shares slip on higher risks of extended lockdown

Coronavirus has been the talk of the global financial markets with price actions keeping largely attributed to the pandemic in the past few weeks. Following a significant rebound in the UK shares towards the end of last week, Monday kicked off with another downward rally as investors expressed concerns of a broader economic impact in an event of an extended shutdown due to the ongoing health emergency.  

The blue-chip FTSE 100 index posted a just under 3% decline in the morning session on Monday. The previous week marked the benchmark index’s 1^st weekly gain after keeping downbeat for 7 weeks in a row.

China Reduces Reverse Repurchase Agreements Rate By 20 Basis Points

Monday’s decline, as per the analysts, was also attributed to a surprise decision by the central bank of China to reduce the reverse repurchase agreements rate by 20 basis points on Monday. The rate cut, branded as the largest in around 5 years, was directed at supporting the economy that has been hit hard by the Coronavirus pandemic.

The ongoing price war between the top oil producers of the world, Saudi Arabia and Russia, along with the economic impact of Coronavirus posted an over 2.5% decline in oil majors like Royal Dutch Shell (AMS:RDSA) and British Petroleum (LON:BP) on Monday.

In a statement on Monday, one of the UK’s senior medical officer predicted that the countrywide lockdown is likely to extend for months before it is lifted gradually. The statement stirred further unease in the financial markets on the risk of an even broader economic hit due to the flu-like virus.

EasyJet Grounds Fleet And Furloughs Cabin Crew To Cut Costs

The British multinational engineering company, Rolls Royce (LON:RR), contributed the most to FTSE 100’s decline with an 8.4% drop on Monday. UK’s low-cost airline, EasyJet (LON:EZJ) also announced earlier today that it will be grounding its entire fleet and placing 4,000 of its cabin crew in furlough to save costs amidst the health crisis that has brought the global travel industry to a halt. Following the announcement, EasyJet was also reported trading 2.6% down.

The midcap FTSE 250 index, on the other hand, posted an even broader 4% decline on Monday. At 14,320, the FTSE 250 index is currently trading around 35% down as compared to its record high that was noted at the start of the year. At 5,470, the FTSE 100 index, on the other hand, has also dropped just under 30% as compared to its record high in July 2019.