Miners sent stocks in London into a deeply red close on Monday on fears that Covid-19 lockdowns will extend to China's capital city, as cases spike.
Fears of a hard Covid lockdown sparked panic buying in Beijing, as long queues for compulsory mass testing formed in a large central district of the Chinese capital.
China is already trying to contain a wave of infections in its biggest city Shanghai, which has been almost entirely locked down for weeks and reported 51 new Covid deaths on Monday.
Shanghai has struggled to provide fresh food to those confined at home, while patients have reported trouble accessing non-Covid medical care - and the rising cases in the capital triggered fears of a similar lockdown. Downtown Beijing's most populous district Chaoyang, home to around 3.5 million people, ordered mass testing from Monday for residents and those coming to work there.
The area hosts embassies and the headquarters of many multinational firms. Queues snaked around malls and outside office complexes as people waited to be swabbed for samples by health workers in protective gear.
The FTSE 100 index closed down 141.14 points, or 1.8%, at 7,380.54. The mid-cap FTSE 250 index ended down 282.58 points, or 1.4%, at 20,599.22. The AIM All-Share index closed down 15.97 points, or 1.5%, at 1,033.05.
The Cboe UK 100 index ended down 1.8% at 736.02. The Cboe 250 closed down 1.4% at 18,213.58, and the Cboe Small Companies ended down 1.2% at 15,124.94.
In mainland Europe, the CAC 40 stock index in Paris ended down 2.0%, while the DAX 40 in Frankfurt ended down 1.5%.
‘The prospect of further restrictions in China could lead to a poisonous mix of further inflationary pressure, as supply chains in the so-called 'factory of the world' get disrupted, and weaker economic growth. The result could be stagflation - a slowing economy accompanied by surging prices - a brew few investors would be able to stomach,’ said Russ Mould of AJ Bell.
Defensive stocks sat towards the top of the blue-chip index. Reckitt Benckiser ended the best performer, up 2.9% and Unilever added 1.9%.
At the other end of the large-caps, Anglo American ended the worst performer, down 6.9%. The miner said it is aware a Chilean regulator has recommended the miner's environmental assessment process for its Los Bronces mine be rejected.
‘The Environmental Assessment Service of Chile has confirmed that Los Bronces integrated project satisfies all relevant environmental regulation but bases its adverse recommendation on an alleged lack of information during the evaluation process to fully remove any doubts about a potential risk to public health,’ Anglo said.
A decision on the permit application by the SEA is expected within the next week. If the permit is rejected, Anglo stressed the process ‘allows for further review’.
The mining sector as a whole was hurt amid Covid-19 fears in China. The FTSE 350 Mining sector index, which houses London's metals and mining stocks, lost 3.4%. In addition, BlackRock World Mining Trust, which invests in listed miners, ended the worst FTSE 250 performer, down 8.0%.
Aveva Group closed down 5.5% after Bank of America downgraded the industrial software provider to 'neutral' from 'buy'.
Oil majors BP and Shell closed down 6.2% and 5.2% respectively, tracking spot oil prices lower.
Brent oil was quoted at $100.33 a barrel at the equities close, down sharply from $106.44 at the close Friday.
Oil prices slumped on economic slowdown worries caused by China's lockdowns and US interest rate rises.
Elsewhere, McColl's Retail shares dived 55%. The convenience store chain said it saw ‘softer’ trading over Easter and warned on the outcome of financing solution talks.
Back in March, it said it was in talks with lenders to find a ‘longer-term agreement’ for the balance of its existing lending facility.
‘A potential financing solution is under active discussion with its key commercial partner and lenders which would resolve the short term funding issues and create a stable platform for the business going forward,’ McColl's said on Monday.
However, it cautioned: ‘It should be noted that even if such a successful outcome is achieved it is increasingly likely to result in little or no value being attributed to the group's ordinary shares.’
The pound was quoted at $1.2715 at the London equities close, sharply lower from $1.2848 at the close Friday. Sterling was trading at its lowest level in 19 months against the greenback.
On the political front, UK Prime Minister Boris Johnson could be forced to resign after the Sue Gray review into claims of Covid rule breaches in the government is published, according to a report.
Gray, a senior civil servant, was forced to delay the publication of her investigation into alleged parties held in Downing Street and Whitehall during England's coronavirus lockdowns due to the Metropolitan Police commencing their own inquiry.
In an interim report published in January, the Cabinet Office official said there had been ‘failures of leadership and judgment’ in No 10 over the so-called 'partygate' saga. The Times, citing an official it described as being familiar with the contents of the complete report, said Gray's full findings were even more personally critical of Johnson and could end his premiership. No 10 declined to comment.
The euro stood at $1.0715 at the European equities close, down from $1.0778. Against the yen, the dollar was trading at JP¥127.70, down from JP¥128.87.
New York was lower at the London equities close extended last week's sell-off triggered by Federal Reserve boss Jerome Powell. The Fed chief indicated that the US central bank would hike interest rates by half a percentage point next month and possibly several times more this year.
The DJIA was down 1.2%, the S&P 500 index down 1.3% and the Nasdaq Composite down 0.3%.
On Wall Street, Twitter was up 3.8% amid reports the social media company will soon accept Elon Musk's takeover offer, a dramatic shift after the board originally organised a ‘poison pill’ defense to ward off the billionaire entrepreneur's hostile buyout bid.
The deal, which media outlets including the Wall Street Journal reported could be announced later in the day, would put the Tesla boss in charge of the influential social media site that is perhaps best known for at one time being the platform of choice for former US president Donald Trump.
Gold stood at $1,898.25 an ounce at the London equities close, lower against $1,929.57 late Friday.
The economic events calendar on Tuesday has UK public sector finance numbers at 0700 BST and US advance report on durable goods at 1330 BST.
The UK corporate calendar on Tuesday has first-quarter results from global lender HSBC Holdings and interim results from Primark owner Associated British Foods. Housebuilder Taylor Wimpey issues a trading statement.
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