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Markets rally following UK lockdown

Markets rally following UK lockdown
 Prime minister Boris Johnson

European markets look set to rally as the UK went into lockdown to curb the spread of the coronavirus.

Yesterday evening (March 23) prime minister Boris Johnson addressed the nation to announce strict new measures to limit the number of people infected by the virus.

People were asked to only leave their homes for “very limited purposes”, namely: shopping for necessities, one form of exercise a day, any medical need and travelling to work.

All non-essential businesses were told to close.

The UK’s blue chip index, the FTSE 100, opened up 3.9 per cent this morning (March 24) while the FTSE 250 index - which is more exposed to the UK domestic economy - rose by 3 per cent.

On the continent, the Euro Stoxx 50 jumped 5 per cent since opening this morning and Germany’s Dax was up almost 6 per cent.

The market rises also followed President Donald Trump’s statement that the Republicans and Democrats were “getting closer” to a deal on the $2bn rescue package to tackle the coronavirus.

The news this bill had previously been blocked in the Senate caused markets to slip yesterday.

In the UK, emergency legislation set to award the government powers never seen in peace time was passed in the House of Commons. It goes before the House of Lords today.

Markets have been volatile over the past few months as the coronavirus has caused countries to close borders, shut down businesses and cancel all non-essential travel.

The spreading pandemic has caused the FTSE 100 to see its biggest daily dive in more than 30 years while the S&P 500 has lost almost 30 per cent since the start of the year.

In a statement published yesterday, the Financial Conduct Authority said it was continuing to “closely monitor market activity” and would “take all actions” within its power to safeguard orderly markets.

It said: “While there has been significant volatility in market prices over the past weeks as a result of the impacts of coronavirus and this may continue for a period, markets have continued to operate in an orderly fashion in the UK.”

In light of the recent significant market volatility, some European countries — such as Spain and Italy — have introduced short-selling bans.

But the FCA said there was no evidence short selling had been the driver of recent market falls and that the ability to take ‘long’ and ‘short’ positions benefited a wide range of ordinary investors and was critical to liquidity.

The FCA added: “The loss of these benefits would need to be carefully balanced before determining that any intervention to prevent short selling was appropriate.”

imogen.tew@ft.com

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