Why is the FTSE 100 down today? Is the stock market going to crash?

The Financial Times Stock Exchange, also known as FTSE 100 index, dropped to its lowest rate since mid-May 2021 today (July 19) as Covid-19 restrictions are lifted in England for ‘Freedom Day’.

Why is the FTSE 100 down today? Is the stock market going to crash? (Image credit: Getty Images)

As of 12.55pm today (July 19), the FTSE 100 Index was down by over 150 points and 2%, with it hitting a two month low of 6844.11.

This comes after the stock index closed at 7008.09 on Sunday July 18, with the abrupt dip occurring this morning as people living in England woke up to ‘Freedom Day’ and the lifting of all legal coronavirus restrictions.

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Despite the optimistic overtones of the UK Government’s decision to lift rules around face masks, social distancing, indoor gatherings and more, the move has been marred by scepticism and fears for the the UK’s overall economic stability.

With the impact of the pandemic and repeated lockdowns still being felt by businesses across all four UK nations, the country also recorded 50,000 new Covid cases in a single day on Friday July 16.

The rapid rise in cases follows Health Secretary Sajid Javid’s declaration that the lifting of restrictions could see over 100,000 new cases a day in the UK from July 19.

First Minister Nicola Sturgeon tweeted yesterday to warn that ‘Freedom Day’ in England should not be treated as a sign that the pandemic is over, saying: “cases in [Scotland] are falling, but are still too high” to ease restrictions entirely in Scotland as they have been below the border.

Here’s what you need to know.

What is the FTSE Index?

The Financial Times Stock Exchange, also known as the FTSE 100, FTSE Index or ‘Footsie’, is the UK’s leading share index, representing the top 100 blue chip companies listed on the London Stock Exchange according to their market capitalisation.

It includes major British companies like Barclays bank, Lloyds Banking Group, Burberry, BP, BAE and AstraZeneca.

Maintained by the London Stock Exchange Group, the FTSE is typically viewed as an indicator of overall economic and market performance in the UK – with its rise or fall in shares generally representing UK market trends on the whole.

Why is FTSE down today?

The FTSE tumble is a sign of resurgent fears from investors and market observers that the rise in Covid-19 cases, combined with the removal of restrictions in England, could potentially impede the UK’s move toward economic recovery.

The share index’s slide has come as ‘Freedom Day’ sparks concerns over whether we could see further lockdowns in future as the Delta variant continues to spread and variants of concern like the Lambda variant remain at large.

The FTSE stock index has fallen alongside many other markets worldwide, with the Dow Jones Industrial Average (DJIA), also down up to 500 points on Wall Street as the United States sees a similar spike in coronavirus cases.

In Europe, the German blue chip companies making up the DAX Performance Index were also trading down by 2% on Monday – moving in tandem with the FTSE 100, CAC 40 and Euro Stoxx.

FTSE companies like Barclays were down over 4% as of 1.44pm, with other large Footsie companies like International Consolidated Airlines Ltd down 9.84 points and 5.86%, ITV Plc down by 5.81% and Rolls Royce down 5.29%.

Is the stock market going to crash?

While peaks and troughs are to be expected in a market still recovering from the economic devastation caused by the pandemic, this latest fall in the FTSE 100 index has revived concerns of a looming market crash approaching in future.

Despite the rising numbers of positive Covid-19 cases in the UK, consumer confidence in British business and recovery has been returning as the rate and pace of vaccination soars across the country.

This positive trend has generally buoyed market insiders’ hopes of greater economic stability in the UK, but the relaxation of restrictions and expectation of even higher levels of daily cases for the country has strengthened doubts about avoiding further lockdowns in the near future.

Even the most recent turn of events in UK politics, which has seen the Prime Minister Boris Johnson and Chancellor Rishi Sunak forced to self-isolate after the Health Secretary received a positive coronavirus test, has brought greater anxiety into the market.

Any sudden U-turn on government coronavirus policy, such as reimposing lockdowns or harsher restrictions, would potentially serve a blow to the UK economy that would make a stock market crash more likely.

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