Markets generally calm but travel and banking stocks weaker on new UK lockdown fears

“With a whirlwind of political, economic, and healthcare activity creating a volatile backdrop, investors took time on Friday to take stock of events. Markets were relatively calm with the FTSE 100 trading 0.2% lower at 6,036, similar movements in many parts of mainland Europe, but small gains seen across Asia,” says Russ Mould, Investment Director at AJ Bell.

“Amid growing chatter about a potential two-week nationwide lockdown in October in the UK, it was perhaps no surprise to see investors lose interest in stocks that could be negatively affected by such activity. It would dash any hopes of a half-term getaway, explaining why shares in British Airways owner International Consolidated Airlines traded nearly 5% lower. Hotel operators InterContinental Hotels and Whitbread also fell for the same reason.

“The Government wants to avoid economic disruption, but clearly a return to tighter lockdown measures next month would disrupt businesses and put further pressure on jobs. Banks already face the prospect of rising bad debts, so a derailment to the country’s fight for economic recovery would be negative for the banking sector, hence why NatWest’s shares traded 2.1% lower.

“Offsetting these negative share price movements were gains from the big mining companies, suggesting that investors remain optimistic about economic recovery on a global basis. Asia is well ahead of the UK with its bounce-back from coronavirus and there has recently been encouraging economic data from the likes of China, implying support for commodities demand. BHP, Rio Tinto and Antofagasta all enjoyed small share price gains on the final day of the trading week.”

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