Watch: Pound and FTSE 100 fall sharply as markets react to Europe's UK travel bans
UK stocks and the pound sold off sharply on Monday morning, as investors reacted to fresh pandemic restrictions in Britain and news that much of Europe had shut its borders to the UK.
Billions were wiped off the FTSE 100 on Monday morning after a new more infectious strain of COVID-19 sparked panic among investors. Stock markets fell sharply around the globe amid fears that the strain could spread internationally.
The FTSE 100 (^FTSE) dropped 2% in minutes when the London Stock Exchange opened, wiping £33bn off the index.
The sell-off deepened as trading continued. The bluechip index was down 3% by mid-morning. The more domestically-focused FTSE 250 (^FTMC) index fell 3.5%.
The pound was down 1.2% against the euro to €1.089 (GBPEUR=X) by mid-morning in London. Sterling fell 2% against the dollar to $1.3238 (GBPUSD=X).
Panic spread to other markets beyond the UK. European stock indexes dropped over 3% and Wall Street was poised for a heavy sell-off. The barrage of selling came in response to pandemic developments in the UK over the weekend.
Prime minister Boris Johnson held an emergency press conference on Saturday announcing the return of lockdown-like conditions for millions of people in London, the South East, and the East of England. The new Tier 4 restrictions were introduced to curb the rapid spread of a new variant of COVID-19, discovered last week. The prime minister said the new strain spreads up to 70% faster than the previous version of the virus.
On Sunday, multiple European countries closed their borders to Brits for fear of importing this new strain. This included France, which banned freight and people travelling from the UK. France’s ban will stand for an initial 48 hours.
READ MORE: UK economy in crisis as countries ban flights and freight from UK
France’s order shut down the Eurotunnel and much of the Port of Dover. The Port of Dover accounts for around a fifth of all trade with the EU, raising the prospect of shortages over Christmas.
“This is a key supply route for fresh produce at this time of year: the channel crossings see 10,000 trucks passing daily during peak periods such as in the run up to Christmas,” said Andrew Opie, director of food and sustainability at the British Retail Consortium.
Sky News reported that Johnson will hold emergency talks on Monday morning to try and avert food shortages.
Travel bans hit London-listed oil and airline stocks particularly hard. British Airways-owner IAG (IAG.L) trailed the FTSE 100, falling 12%. EasyJet (EZJ.L) dropped 11% and Ryanair (RYA.L) lost 6.7%.
BP (BP.L) and Shell (RBSB.L) both fell 7%, while mid-market oil explorer Premier (PMO.L) crashed over 13%. The price of oil (BZ=F) fell over 5%.
READ MORE: Travel and transport stocks nosedive as countries ban flights from UK
On the continent, the CAC 40 (^FCHI) stock index fell 3.7% in Paris and the DAX (^GDAXI) lost 3.9% in Frankfurt.
US stock futures were sharply lower, despite lawmakers agreeing a new stimulus package after months of delays. The new package, worth $900bn, will see Americans receive $600 cheques from the government.
S&P 500 futures (ES=F) were down 2.5%, Dow Jones futures (YM=F) fell 2.3%, and Nasdaq futures (NQ=F) dropped 1.5%.
Naeem Aslam, chief market analyst at Avatrade, said investors around the world were concerned about the new strain of COVID-19 discovered in the UK.
“Investors are paying more attention to the short-term deterioration in the coronavirus situation and forgetting that we have a coronavirus vaccine, which will have much positive influence on the upcoming quarter’s economic data,” he said.
Investors piled into bonds as they dumped stocks. Yields on UK gilts — government bonds — fell to record lows on Monday. (Yields move inversely to price, meaning low yields translate to high demand and high prices). Government bonds are traditionally seen as “safe haven” assets and are in high demand at times of crisis.
The Japanese yen, another safe haven asset, rose 0.5% against the dollar (JPY=X).
Markets were mixed in Asia overnight. Japan’s Nikkei (^N225) fell 0.2% and the Hong Kong Hang Seng (^HSI) dropped 0.7%. On mainland China, the Shanghai Composite (000001.SS) rose 0.7% and the Shenzen Component (399001.SZ) rallied 2%.
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December 21, 2020 at 03:23PM
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UK stocks and pound tumble as Europe shuts borders - Yahoo Finance
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