European stocks, oil prices and the pound slumped yesterday as a highly infectious strain of coronavirus in Britain had traders seeking shelter.
Sterling lost 1.3% against the dollar, with the pound also still being hit as a post-Brexit trade deal between Britain and the EU remained out of reach.
The euro gained 1.0% against the pound, while oil prices slipped by more than 4.0%.
“The short-term crude demand outlook just got dealt a massive blow that will provide added uncertainty over the next couple of months,” remarked Edward Moya, a senior analyst with the online broker Oanda.
London’s benchmark FTSE 100 index was 1.7% lower at 6,416.32 points at the end of the day, while in midday New York trades, the Dow Jones index was off by 0.3%.
Frankfurt’s DAX 30 closed 2.8% down at 13,246.30 points and Paris’ CAC 40 ended 2.4% down at 5,393.34 points, while the EURO STOXX 50 closed 2.7% down at 3,448.68 points.
British Prime Minister Boris Johnson chaired a crisis meeting as a growing number of countries blocked flights from Britain over a new coronavirus strain that the UK said was “out of control”. It overshadowed positive news from Washington, where US lawmakers reached a deal for a nearly $900bn Covid-19 financial rescue package to help struggling Americans.
“The US got its stimulus package through but it seems that was largely priced in and investors are more concerned with the new strain of Covid-19,” Oanda analyst Craig Erlam told AFP.
“Coming at a time when another Brexit deadline has been missed, it’s no surprise to see sentiment taking a big hit.”
The US announcement came as a relief to markets desperate for Washington to give the world’s top economy a much-needed boost as it struggles with the impact of Covid-19.
At the weekend, US authorities also gave the green light to another vaccine produced by Moderna, paving the way for it to be rolled out this week.
“We expect the New Year wish of many market participants to be that the arrival and initial distribution of coronavirus vaccines now signals light at the end of a very tiring and debilitating tunnel,” said a banker.
A post-Brexit trade deal, meanwhile, seemed no closer, with UK-EU talks edging ahead after missing another deadline, overshadowed by the transport chaos caused by the new virus variant.
A more than 5% drop in travel stocks led a slump in European shares yesterday, as the rapid spread of the new strain of the coronavirus forced more stringent curbs in England and a travel ban from many countries.
Canada, as well as European neighbours Germany, Italy and the Netherlands, ordered a suspension of flights from Britain, while France’s ban also included freight carriers.
Travel and leisure stocks were on course for their worst day in three months, with British Airways owner IAG, carrier Lufthansa and travel company Tui plunging between 5.8% and 9%.
Cruise operator Carnival Corp shed 6.4%. As crude prices slid, energy majors BP, Total and Royal Dutch Shell lost between 3.9% and 5.4%. Shell was further weighed down by a $3.5bn to $4.5bn writedown in the value of oil and gas assets.
Worries around the new virus strain also saw investors look past an agreement over a $900bn fiscal aid package in the United States that will be set to vote later yesterday.
Vaccines should still be effective against the new strain, scientists said.
Britain has already rolled out the Pfizer-BioNtech vaccine, while the European Medicines Agency was set to approve it yesterday, followed by a European Commission nod tomorrow.
Frankfurt shares of BioNtech jumped 4.6%.
Among sparse gainers were some healthcare and consumer stocks.
Traders working at the Frankfurt Stock Exchange. The DAX 30 closed 2.8% down at 13,246.30 points yesterday.
