he FTSE 100 was set to fall today amid growing concerns about the pace of the global economy's likely recovery from the Covid pandemic. With a third wave gathering pace in Europe and UK ministers and health officials warning increasingly that it could hit the UK soon, markets have been losing some of their lustre from earlier in the spring. Having fallen yesterday, the FTSE 100 was expected to open 38 points down to 6663.4 today, according to trading on spread betting platform IG.
The European spread of the virus, combined with the failure to roll out the vaccines across the continent, has been steadily strangling the buoyant hopes of a summer reopening of travel and tourism. As CMC Markets analysts warned investors today: "It is slowly becoming apparent that even if the UK and the US succeed in achieving their goal of a successful vaccination program, it's highly unlikely that international travel will be able to return in any meaningful way while a large part of Europe remains behind the curve in inocculating its populations." The UK government's decision to impose fines of GBP5000 on anyone travelling abroad without good reason between now and June "kills off" the prospect of any significant travel before the third quarter, it added.
US markets fell last night, following on from Europe, but bond yields fell back on the weakening sentiment towards the recovery. Yields have been rising due to fears of inflation, so today's data on CPI in the UK will be closely watched this morning. February CPI is expected to be benign, edging up to 0.8% from 0.7%, with core prices staying at 1.4%, but that won't stop markets predicting a pickup later in the year.
Flash PMI data on manufacturing and services for the UK are expected to be positive, coming in at 55 and 51.1 respectively on an index scorecard on which anything above 50 means expansion. In Europe, lockdowns are likely to have impacted services in France and Germany, with lockdowns of restaurants and bars now expected to be extended beyond Easter. Manufacturing should fare better, particularly in Germany, but in general, news on the economic front will not deliver much cheer today.
In the face of all that negativity, a Numis broker note on private equity group 3i could give heart to investors.
Following a recent capital markets day in which 3i showcased the growing long term strength of its blockbuster investment in Action, a discount EU retailer, Numis said it considered 3i's portfolio had "strong valuation momentum".
The private equity group's investments had weathered the Covid storm well so far, and Action had strong potentials to open in Northern Italy and Spain when it becomes safe to do so.
Numis retained a Buy recommendation and a target price of 1360p.