FTSE 100 futures sinks to 10-year low

The European Central Bank’s advisory of a €750 billion stimulus saw FTSE Futures rise briefly, only to reverse lower an hour later.

UK derivative benchmark index FTSE 100 Futures is down for the third straight day in overnight trading.

Heading into Thursday 19 March, Footsie Futures are trading at 4,822.2 – 262.8 points and 5.2% below the previous day’s close, as at 3.45am GMT. This is the lowest level since June 2010.

This was preceded by a brief rise two hours earlier to 5,127.5.

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European Central Bank to spend €750 billion in bond purchases

On Wednesday 18 March, the European Central Bank (ECB) announced that it would spend €750 billion to buy back bonds in a bid to stimulate the economy, in a so-called Pandemic Emergency Purchase Programme.

The ECB stated in a press release that it will ‘ensure that all sectors of the economy can benefit from supportive financing conditions that enable them to absorb this shock’, adding that this applies to firms, banks and governments.

It further noted that the Governing Council of the ECB is prepared to increase the size of its asset purchase programmes and adjust their composition, ‘by as much as necessary and for as long as needed’.

News of the stimulus did little to appease the European markets, with European benchmark Stoxx closing down 4% and Germany’s DAX Performance Index losing 5.56% to end the day.

The FTSE 100 index also finished proceedings 4% lower, while the pound also weakened to its lowest level since 1985 – the GBP/USD hit 1.14844 at 2am GMT on 19 March. This is also lower than the levels achieved during Brexit.

IG Asia market strategist Pan Jingyi wrote that while the ECB’s announcement is ‘positive’, this will not necessarily lead to an immediate reversal. She added that ‘any improvement in the market sentiment would be one to watch in the lead up towards stabilisation’.

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UK’s £350 billion coronavirus fightback

On Tuesday 17 March, the UK also unveiled its own coronavirus financial rescue plan.

UK Chancellor Rishi Sunak, who oversees the country’s economic matters, said the government will pump in £350 billion toward businesses, as he declared the pandemic both a public health and economic emergency.

The bailout, equivalent to 15% of the UK’s total Gross Domestic Product, will include £330 billion in loan guarantees to businesses of all sizes, as well as a further £20 billion aid in the form of tax holidays for the hospitality sector and one-time funding grants of between £10,000 and £25,000 to small businesses.

Together with other Budget measures previously announced, direct financial support comes up to an estimated £32 billion.

On the supply-side measures, Sunak said that ‘any business who needs access to cash to pay their rent, their salaries, suppliers or purchase stock will be able to access a government-backed loan or credit on attractive terms’.

‘And if demand is greater than the initial £330 billion (for loans) I'm making available today, I will go further and provide as much capacity as required. I said whatever it takes, and I meant it,’ he said.

The rescue package was announced as the total number of coronavirus cases in the UK hit 1,950 and deaths numbered at 71. The government’s chief scientific also earlier estimated that about 55,000 residents might have contracted the virus.

Read also: FTSE 100 Futures index stays down despite £350 billion rescue package

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