Markets plunge on Africa’s Covid variant scare
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5pm: Markets plunge
The FTSE 100 closed 266.34 points (3.64%) lower at 7,044.03 as investors fled equity markets over the potential economic impact of the new Covid variant.
Wall Street took the baton from Europe and the Dow Jones Industrial Average was down over 950 points, or 2.7% at the time of London’s close, while the broader S&P 500 index and the tech-laden Nasdaq Composite both dropped over 2%.
Craig Erlam, senior market analyst, UK & EMEA, at OANDA commented: “Risk assets are getting pummelled at the end of the week as a new Covid variant sparks fears of new restrictions and lockdowns.
“The most worrying thing about the new strain at the moment is how little we know about it, with early indications being that it could be more problematic than delta.
“The biggest fear is that it will be resistant to vaccines and be a massive setback for countries that have reaped the benefits from their rollouts.”
He added: “We’ll no doubt learn more in the days and weeks ahead but for now, fear of the unknown will weigh heavily going into the weekend and could carry over into next week.
“We’re seeing a typical flight to safety in the markets with equities, commodity currencies and oil getting whacked and traditional safe havens like bonds, gold, the yen and swissy getting plenty of love.”
Pfizer helped to calm nerves, stating that should a vaccine-escape variant emerge, it could produce a tailor-made vaccine in about 100 days.
In equity markets, travel-related shares took the biggest hit, with British Airways owner IAG descending 14.49%, Premier Inn owner Whitbread falling 8.84%, InterContinental Hotels 8.59% weaker, and tour operator TUI 9.74% lower.
Wizz Air was 15.09% lower, cruise operator Carnival sank 15.63%, easyJet dropped 11.91%.
Engine maker Rolls-Royce and GKN owner Melrose Industries also fell sharply, by 11.08% and 9.73%, respectively.
Leisure and hospitality stocks were also on the back foot, with Cineworld, Mitchells & Butlers and Restaurant Group all down by 7.27%, 2.54% and 7.29%.
Oil giants were lower as well, with BP down 7.47% and Shell off 5.69%, as oil prices slid.
On the upside, online grocer Ocado, which previously benefited from lockdowns and restrictions, jumped 4.6% by the end of trading.
Commenting earlier today, Russ Mould, investment director at AJ Bell, said: “Forget Black Friday; today has been renamed Red Friday after the colour of share price screens as stocks slump globally on fears over a new Covid strain.
“The drop in the oil price the market’s way of saying it is worried about a reduction in economic activity, something which also explains the slump in metal prices.
“Markets are clearly speculating that a rapid spread of a more brutal Covid strain could once again derail the global economy. Banking stocks were also weak as they are closely tied to economic activity.
“The flipside of falling commodity prices is that a weaker oil price should provide some relief in terms of inflationary pressures.
“That may cause central banks to be more cautious towards raising rates in the near-term, however it does depend on whether the new Covid strain causes significant disruption or can be contained as best as possible in a rapid manner.
“Headlines calling it the ‘worst ever variant’ have caused investors to panic and dump shares in travel-related stocks for fear that we’re going to see tough travel restrictions once again.
8.15am: Shares crash
The FTSE 100 plunged 211.37 points (2.89%) to 7,099 at the open on worries over the latest Covid variant emerging from Africa.
7am: Parkmead seeks deals
Energy group Parkmead said it is “actively evaluating” further acquisition opportunities in renewables, gas and oil in line with its strategy to build a balanced portfolio of assets.
Nine acquisitions, at both asset and corporate level, have been completed to date.
7am: Diageo share buyback
Diageo has begun the next tranche of its £4.5 billion capital return to shareholders by 30 June 2024.
Under the first phase of the ROC programme, which was completed on 31 January 2020, Diageo repurchased shares to a value of £1.25 billion.
Diageo initiated the second phase of its ROC programme of up to £1.0 billion on 12 May 2021, to be completed by the end of fiscal 22. Under the first tranche of the second phase, which was completed on 12 November 2021, Diageo repurchased shares to a value of £0.45 billion.
Diageo has hired Goldman Sachs International to buy back shares with a value of up to £0.55 billion from today until 4 March 2022.
Further execution phases will be announced in due course.
Markets are on alert over the spread of a possibly vaccine-resistant Covid variant which has prompted the UK to impose travel restrictions on those arriving from six African states.
Asian stocks suffered their sharpest drop in three months and oil prices tumbled after the detection of the variant, sending investors to seek safety in bonds, the yen and the dollar.
The FTSE 100 was expected to tumble 128 points at the outset to 7,182, with oil companies likely to be leading the retreat.
Japan’s Nikkei 225 is off 768 points at 28,731 while in Hong Kong, the Hang Seng is down 565 points at 24,175. Brent crude was trading at $78.89 a barrel, down $2.03.
UK retailers were gearing up for Black Friday in the hope of gaining some respite from a year of disruption.