The FTSE 100 has crashed more than 3pc as the discovery of a new Covid super-variant sparked doubts over the economic recovery.
The new South Africa variant, which has also been detected in Hong Kong, is feared to be more transmissible and could even evade vaccines.
The UK has reinstated the travel red list for South Africa and six other African countries from noon today in a bid to delay the variant’s arrival in Britain.
This sparked a huge sell-off in Asia overnight, with Japan’s Nikkei suffering its biggest fall in three months. The MSCI index of Asia shares outside Japan fell 2pc, its sharpest drop since August.
Investors flock to deliveries and sanitiser
There are echoes of March 2020 this morning, with investors turning to lockdown-friendly stocks.
Just three companies are currently trading higher: Ocado is up 2.9pc, while Reckitt Benckiser and Royal Mail are up 0.3pc and 0.2pc respectively.
The movements suggest traders are betting on more home deliveries this winter, as well as higher demand for cleaning products.
Even Bitcoin feels the heat
It seems there’s no escape from this morning’s Covid concerns – even cryptocurrency is feeling the heat.
Bitcoin, which recently surged to record highs, is down almost 6pc at $55,494. Ethereum, the second largest digital coin, has also slumped 5pc.
Leisure and travel stocks lead falls
Unsurprisingly, it’s leisure and travel stocks that are taking the biggest beating across Europe this morning.
The UK and Israel have already announced travel bans from southern Africa, while the EU has said it’s likely to follow suit.
Here’s how the biggest European players are faring:
- Airlines: IAG -21pc, Lufthansa -12pc, Air France-KLM -9.7pc, EasyJet -16pc, Wizz Air -16pc, Ryanair -9.5pc
- Tour operators: TUI -11pc, Jet2 -7.2pc, On the Beach -8.6pc
- Hotels: IHG -6.7pc, Accor -8.8pc, Melia Hotels -9.4pc, Scandic Hotels -6.5pc, Whitbread -6.9pc
- Travel hub retailers: Dufry -10pc, WH Smith -9.8pc, SSP Group -9.8pc, Autogrill -13pc
Gas prices slump on virus risks
There’s some bittersweet news in energy markets as soaring gas prices have begun to ease – but not for the best of reasons.
Gas prices have surged in recent months, contributing to an escalating energy crisis that has put around 25 suppliers out of business.
Benchmark Dutch gas has reversed course this morning, falling 2.9pc to €90.52 a megawatt-hour, though it’s still up for a fourth consecutive week.
It comes as the new Covid variant fuels concerns that a rise in infections and the introduction of tighter restrictions will curb demand for energy over the winter. A rise in wind power has also contributed to the easing of prices.
FTSE risers and fallers
Right, time to take stock of what’s happened on the FTSE so far.
The blue-chip index has slid further into the red – it’s now down 3.4pc at 7,063 points as investors react to the new South Africa Covid strain.
IAG is the biggest faller. The British Airways lost as much as a quarter of its value, but it’s now pared some of its initial losses to trade down 14pc.
Jet engine maker Rolls-Royce is down 13pc, while hotel groups InterContinental and Whitbread have both fallen 7pc.
British Airways owner loses fifth of its value
It looks like IAG may be one of the biggest losers from the Covid troubles.
The British Airways owner has bombed 21pc after the UK brought in a travel ban on South Africa and five other southern African nations. The EU looks set to follow suit.
It’s leading a 6.6pc decline on the wider pan-European Stoxx 600 travel and leisure index.
FTSE 100 tumbles
As expected, it’s a huge drop for the FTSE 100.
The blue-chip index slumped as much as 2.3pc at the opening bell. It’s now down 2.2pc at 7,147 points.
Initial numbers coming through suggest there are some hefty falls across the index.
InterContinental Hotels Group is down 5.1pc – its biggest decline in 17 months.
Banking stocks are also taking a hit, with Barclays and Lloyds firmly in the red. Anglo-South African firm Investec has dropped 5.2pc in its biggest fall for eight months.
EU proposes South Africa travel ban
The EU looks likely to follow Britain’s lead and halt air travel from southern Africa in a desperate bid to keep the new strain out.
European Commission President Ursula Von der Leyen said the bloc was planning to “activate the emergency brake to stop air travel from the southern African region due to the variant of concern B.1.1.529”.
Oil tumbles on Covid concerns
Oil prices are taking a battering this morning as news of the new variant casts doubts over demand for the winter.
Brent crude dropped 3.9pc to below $80 a barrel amid a wave of caution across global markets. West Texas Intermediate – another key benchmark – slumped 4pc to below $75 a barrel.
What’s happening with the new Covid variant?
The discovery of the new South Africa variant has sparked panic on the markets, but how bad is it?
Researchers don’t yet know just how lethal or transmissible it is, but the Government is taking a cautious approach. Fears that the strain, which has 32 mutations, could evade the vaccine are particularly concerning.
Sajid Javid, the Health Secretary, said the new variant “may be more transmissible” than the delta strain and added “the vaccines that we currently have may be less effective”.
A JCVI scientist has warned the public needs to be ready for new restrictions in the wake of the discovery.
FTSE set to slump at the open
It looks like the FTSE won’t be immune from the wider market jitters this morning.
Futures tracking the blue-chip index are pointing 2pc lower as investors respond to the discovery of a potentially vaccine-resistant Covid variant.
The sentiment has spread elsewhere in Europe, with futures tracking the continent’s top 50 companies falling 2.3pc.
All eyes will be on travel stocks when the FTSE opens after the Government announced a temporary ban on flights from South Africa and five neighbouring countries.
Asian shares crash on new Covid fears
Some rather grim reading to kick off your Friday, I’m afraid, as news of the new Covid super-variant sends shockwaves through markets.
While not much is known about the B.1.1529 variant – first discovered in South Africa – warnings that it’s the most dangerous mutation ever seen have been enough to spook investors.
As well as the sharp drop in Asian stocks, US futures slumped and crude oil lost ground. US Treasuries and the yen have both pushed higher, while the South African rand dropped to its lowest level in a year.
5 things to start your day
1) M&S under fire over plan to demolish flagship Marble Arch store Critics say it risks advent of ‘ugly spreadsheet architecture’
2) More EU nationals left UK last year than arrived for first time in three decades Net migration plunges as pandemic restrictions and post-Brexit rules came into force
3) Bank of England museum to host slavery exhibition Portraits of former governors linked to slave trade will go on display when Bank museum reopens
4) Huel founder in line for hundreds of millions from £1bn float Julian Hearn holds a 53pc stake in the meal-replacement drink company
5) Energy watchdog faces ‘serious questions’ over string of supplier collapses Two more energy providers stopped trading on Thursday, affecting another 70,000 households
What happened overnight
Stocks fell and headed for their largest weekly drop in almost two months on Friday, while safe haven assets such as bonds and the yen rallied as a new virus variant added to swirling concerns about future growth and higher US interest rates.
South Africa’s rand fell 1pc in early trade, as did US.crude futures. S&P 500 futures fell 0.4pc, while the risk-sensitive Australian and New Zealand dollars dropped to three-month lows.
Japan’s Nikkei was down 1.7pc in early trade and Australian shares fell 0.6pc. MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.2% for a weekly fall of 1pc.
Coming up today
- Corporate: No company releases scheduled for today
- Economics: Money supply (EU)