Sector movers: Cyclicals walloped as Covid-19 lockdowns trigger volatility spike
Stocks were walloped in the middle of the week as concern over the impact that the second Covid-19 wave would have on economies in the near-term, miners, chemical companies and life insurers all lower.
IG chief market analyst, Chris Beauchamp, described the selling as "relentless" and even more "dramatic" than on Monday, citing moves to lockdowns in Germany and Switzerland as the proximate trigger.
Similar measures were likely not far behind for the UK, he said, while media reports said France was likely to follow suit later in the evening.
According to Ian Shepherdson at Pantheon Macroeconomics, the 90% drop in infections in Israel over just one month was the likely template for Western Europe.
In the States, the latest data showed a 21.4% rise in new confirmed cases of Covid-19 from Tuesday last week to 73,200, extending the spread seen since the start of October.
The speed of the deterioration in investor sentiment was reflected in key gauges of stockmarket volatility on both sides of the Atlantic.
As of 1626 GMT, the US CBoE's VIX index, which many refer to as Wall Street's 'fear gauge' was 14.1% higher to 38.05 and near its highest level since June, although it remained below half that seen in March.
A comparable gauge for volatility on the Euro Stoxx 50 was climbing 15.15% to 37.7.
Over the previous days and weeks, some strategists had also pointed out that Wall Street was likely to remain range-bound until the new President was in the White House in February.
Yet while death and hospitalisation rates in Western Europe remained much lower than in March, the economic toll of lockdowns was all too clearly a very real concern.
On that note, on Wednesday, analysts at Capital Economics were saying: "With President Macron set to announce more restrictions to activity this evening and Chancellor Merkel due to hold negotiations with regional governments to do the same, it is not surprising that equities in the euro-zone are down sharply today, and even more so than in the US.
"That said, we still think that euro-zone equities will outperform their US counterparts next year, if coronavirus is brought under control."
Aerospace - one of the most exposed areas of the market to Covid-19 - managed to keep its head above water, helped by a dip in Sterling despite reports that a Brexit deal could be ready by early November.
Rolls Royce was the standout gainer, soaring more than 12% after shareholders backed the British engineer's £2bn right issue, throwing it a lifeline as its tries to survive the Covid crisis.
The emergency fundraising will allow Rolls to unlock a wider support package worth £5billion in total. This includes £2bn of bonds that will be sold on the debt market and another £1bn through refinancing with its banks.
In related news, earlier in the session, sector giant Boeing posted a big drop in free cash flow and cash on hand over the third quarter, which prompted the manufacturer to lay out plans for a 20% reduction in its workforce by the end of 2021.
For his part, AJ Bell's Laith Khalaf said: "It's surprising it's taken markets this long to take fright at the second wave of the pandemic [...] The writing has been on the wall for several weeks now, but stock markets have had their blinkers on.
"Even the mighty US stock market, which has reached record highs in the face of a global economic slowdown, finds itself in the red."
Top performing sectors so far today
Aerospace and Defence 2,929.50 +0.23%
Alternative Energy 0.00 0.00%
Alternative Investment Instruments NULL 0.00%
Automobiles and related providers NULL 0.00%
Banking NULL 0.00%
Bottom performing sectors so far today
Leisure Goods 26,488.13 -3.45%
Mining 16,730.91 -3.45%
Chemicals 12,352.55 -3.42%
Personal Goods 37,187.98 -3.41%
Life Insurance 5,321.34 -3.10%