- FTSE 100 closes 3.7pc lower; Travel and leisure stocks slump
- Wall Street tumbles – S&P 500 and Nasdaq down 2.3pc; Dow Jones sees worst fall of the year
- Oil prices collapse amid demand fears
- Wetherspoon boss Tim Martin goes to war on 'box-ticking' shareholders
- Ben Wright: JP Morgan should make no apologies to the Chinese Communist Party
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O il prices have collapsed amid fears of lower demand over the winter as the new Covid strain sparks chaos across global markets.
US oil prices slumped 10pc to just above $70 a barrel, while benchmark Brent crude dropped more than 9pc to below $75.
The discovery of the new strain has sparked renewed restrictions, with the UK, EU and other nations banning travel from southern African countries. Traders now fear further lockdowns could hamper demand for oil.
The sharp decline in prices has undone most of oil's gains over the last two months and further complicates a row over output levels between production cartel Opec and major consumers such as the US.
I t’s now time to say goodbye after a very eventful day for markets. Thank you for following us and see you next week! Before you go, have a look at some of our main stories today:
- Fresh Covid fears threaten to derail Bank’s fightback against inflation
- Post Office value slashed to zero after postmasters scandal
- Nadine Dorries ‘minded’ to let Rupert Murdoch merge the Times and Sunday Times
- Former Tesco chief Terry Leahy joins electric car charging start-up
- UK economy to grow faster than China's for first time since Mao
OPEC+ may scrap plans to raise output next week
O PEC+ may scrap plans to raise output at next week’s meeting after today’s oil price crash, which was the worst seen in a year.
The Saudi-led alliance was mulling over a modest production hike scheduled for January but it’s now unlikely to be implemented, according to Bloomberg .
The group was already considering a pause after the US and other importing countries announced the release of emergency oil stockpiles earlier this week.
"The emergence of a new Covid variant that could spawn renewed shutdowns and travel restrictions is precisely the type of change in market conditions that could cause ministers to deviate from their plan" to add barrels, Bob McNally, president of consultant Rapidan Energy Group and a former White House official, was reported as saying.
Coronavirus vaccine makers have already started studying the new variant
C oronavirus vaccine makers have already started analysing how the new variant, B.1.1.529, is interacting with their jabs.
Tests are underway at Johnson & Johnson, while Pfizer and BioNTech have begun investigations, CNBC reported.
AstraZeneca is also on the case with studies in Botswana and Eswatini.
The European Centre for Disease Prevention and Control assigned it the category "Variant of Concern."
Wall Street extends losses as short trading day ends
U S stocks continued their descent until close on the short trading day.
The S&P 500 and the Nasdaq finished both 2.3pc lower, recording their worst performance since September. The Dow Jones Industrial Average saw its sharpest drop of the year of 2.5pc. Just like in the UK, travel and leisure stocks were among the biggest losers.
Treasuries jumped on haven bids, sending the 10-year yield down the most since March 2020 on a closing basis, while traders pushed back bets on the Federal Reserve hiking rates.
Dow Jones closed down >900 points in biggest drop since Oct 2020 as new COVID variant sparks market plunge. It’s the worst Black Friday on record for the Dow, acc to Dow Jones Market Data. WHO says new Coronavirus strain detected in Southern Africa is variant of concern. pic.twitter.com/CsxdzsfK9r
— Holger Zschaepitz (@Schuldensuehner) November 26, 2021
Brent crude plunges by over a tenth amid mounting concerns for new coronavirus variant
O il prices have plunged about $10 a barrel this afternoon in the largest one-day drop seen since April 2020.
Brent crude fell 11.2pc to $73.02 a barrel while US WTI crude was down 13pc to $68.29 a barrel.
The new COVID-19 has become a major concern, adding to worries over a wider supply surplus in the first quarter.
“We think it's still early days to say what this means for the global economy, but it has raised concerns about weaker demand for some commodities, especially oil if travel restrictions are re-imposed,” economists at Capital Economics commented.
“These developments will make the OPEC+ meeting next week even more intriguing. We now think that there is a much higher risk that OPEC+ decides to slow or halt the gradual return of supply given mounting concerns over demand and the release of reserves.”
Telecom Italia’s boss to offer resignation to help with KKR bid
T elecom Italia’s boss Luigi Gubitosi is set to resign as early as today to facilitate a €10.8bn takeover offer by private equity firm KKR.
Directors of the former Italian monopoly are meeting in the afternoon and are likely to accept the departure, Bloomberg reported.
Gubitosi was already under pressure following last month’s surprise profit warning that led to a rift with top shareholder Vivendi. The French giant has been closely watching Gubitosi after his efforts to boost premium services failed to stop the decline.
Chairman Salvatore Rossi could assume the chief executive role on an interim basis, while the head of Brazil, Pietro Labriola, could be promoted to group general manager.
FTSE 100 suffers biggest fall in more than a year
T he FTSE 100 has suffered its biggest fall in more than a year, as fears over the newly detected and possibly vaccine-resistant coronavirus variant hit global stock markets.
London’s leading index ended an otherwise solid trading week down 3.7pc, its lowest in more than seven weeks, with commodity, travel, and banking stocks leading the sell-off.
British Airways owner IAG slumped 14.8pc, followed by Rolls-Royce down by 11.6pc. Hotel chains InterContinental Hotels and Whitbread both lost around 9pc.
JX Nippon to sell UK North Sea assets for £1.2bn
J X Nippon Oil & Gas Exploration has agreed to sell its UK North Sea assets to private equity-owned NEO Energy for £1.2bn.
The agreement, subject to regulatory approvals, includes the Japanese group's 20pc interest in the Mariner deposit, which is operated by Norway’s Equinor, and 18pc of TotalEnergies’ Culzean project. They are among the newest large oil and gas fields in the region.
The deal doesn't include JX Nippon's interests in the North Sea's Andrew Area, as the Asian group has been negotiating a potential sale to oil major BP.
The purchase could be the biggest in the basin this year, as large energy companies make space for smaller producers and private equity firms.
Blue Prism bidder given deadline to raise offer
J ilted bidder SS&C Technologies has been given another two weeks to make a new offer for robotics software company Blue Prism, or walk away.
Yesterday the Aim-listed group agreed to a £1.2bn takeover proposal, equating to £12.50 per share, from US private equity firm Vista Equity.
However, SS&C had previously offered £12.20 per share.
The Takeover Panel said that SS&C must make a firm offer by 5pm on Dec 2, although if a third party enters the race the timeline will be extended again.
Shares in Blue Prism closed 6.8pc higher at £12.98 today.
T hat’s all from me – thanks for following on a hectic day for markets…
Giulia Bottaro is in the driving seat now to see you through to the weekend.
Former Tesco chief Terry Leahy joins electric car charging startup
S ir Terry Leahy, the former Tesco chief, has joined an electric car charging startup as it steps up plans for a London listing.
Here’s more from Howard Mustoe :
Myenergi is riding a wave of interest in electric vehicles as Britain plans to ban the sale of combustion engine vehicles from 2030. The cost of electric cars is falling and their range is rising, making them increasingly attractive purchases.
Its products include the Zappi car charging system, let customers use cheap overnight electricity, solar panels and small wind turbines to replenish their cars as well as sell electricity back to the grid. It notched up sales of £16.6m for the latest year.
Sir Terry has been named a director of Myenergi, in which he and tech investor William Currie invested £1.2m in 2018.
He is likely to take on a senior non-executive role as the firm lines up its next stage of expansion, which could involve a share sale, or a takeover by a private equity buyer or rival.
Issa brothers weigh merger of Asda and EG Group
T he billionaire Issa brothers are said to be mulling a merger between Asda and their petrol station chain EG Group.
The Blackburn duo are weighing a range of options for EG, which they own with private equity firm TDR Capital, including a tie-up that could value the combined business at around $35bn (£26bn), Bloomberg reports.
TDR and the Issas last year took control of Asda in a £6.8bn deal. The supermarket chain has been stepping up its cooperation with EG recently, though the pair recently abandoned a £750m deal to sell Asda’s forecourt assets to EG.
According to the report, EG’s owners have also been looking at other options including a sale of their Australian assets or a public listing of the petrol station business.
City watchdog gets its skates on amid backlash
T he City watchdog has given its senior managers sweeping new powers to ban rogue firms in a bid to protect consumers more quickly, writes Lucy Burton .
The Financial Conduct Authority (FCA) is trying to speed up its processes following years of criticism that its investigations take far too long.
It has vowed to give its senior staff the power to take matters into their own hands, allowing them to limit a firm’s permissions or start criminal proceedings for areas such as insider dealing.
The watchdog was heavily criticised for failing to act fast enough when problems first emerged at savings firm London Capital & Finance (LCF), which marketed risky “minibonds” to ordinary households but collapsed in 2019.
MPs also this year accused the regulator of dragging its feet on an investigation into the collapse of Neil Woodford’s empire in 2019, after the former star stock-picker revealed his audacious comeback bid in an interview with The Telegraph.
New Covid variant could derail UK recovery, warns BoE’s Pill
N ew strains of Covid and the risk of another lockdown could yet derail the UK’s economic recovery, the Bank of England’s chief economist has warned.
Huw Pill said the arrival of any new variant – such as the so-called Nu variant that crashed global markets today – could impact the Bank’s guidance that interest rates have to rise in coming months.
He said: "If there's a financial disruption, or if there's the onset again of a pandemic and a lockdown, those are the type of events which clearly would change our view of the world.
"We hope those things don't happen. We don't really know what the future holds. It's those unknown unknowns that are the most difficult to manage."
Mr Pill said he was reluctant to offer more precise guidance, citing a quote from the former heavyweight boxing champion Mike Tyson "who famously said everybody has a plan until you're punched in the face".
Money markets have scaled back their bets on a Bank of England rates rise amid panic about the new variant. The chance of a hike at December’s meeting is now seen at around 60pc, after being almost fully priced last week.
Moderna and Pfizer soar as investors pin hopes on vaccines
S hares in vaccine makers including Moderna and Pfizer have soared amid expectations the new strain of Covid will fuel demand for jabs.
Moderna leapt 22pc, while Pfizer jumped as much as 6.8pc. BioNTech, which partners with Pfizer on a vaccine, climbed 18pc.
The companies have also been boosted by disappointing results from Merck’s rival antiviral pill, while Pfizer on Thursday secured EU approval for expanded use of its Covid vaccine among children.
BioNTech today said it will need two weeks to determine how effective its jab is against the new strain, which was first discovered in South Africa.
It said: “We expect more data from the laboratory tests in two weeks at the latest. These data will provide more information about whether B.1.1.529 could be an escape variant that may require an adjustment of our vaccine if the variant spreads globally.”
Black Friday drives up retail spending
T ransactions have jumped across the UK as shoppers race to snap up the biggest Black Friday bargains.
The latest data from Barclays card show that as of 1pm payment volumes are up 23.3pc on the same period last year.
The numbers are flattered somewhat by the restrictions that dented sales during Black Friday 2020, though supply chain troubles and inflation are placing their own pressures on this year’s shopping bonanza.
Compared to pre-Covid levels in 2019, payment volumes are up 4.2pc.
Rob Cameron, chief executive of Barclaycard Payments, said:
Encouragingly, Black Friday this year is off to a strong start despite a challenging macroeconomic backdrop.
This morning we've already seen an 23.3 per cent increase in transactions compared to Black Friday 2020. It’s clear that there is still appetite for the savings that are to be had, and consumers are making the most of shops being open to pick up a festive bargain.
Retailers will also be pleased to see their sales volumes have recovered to pre-pandemic levels, and have surpassed those seen in 2019.
US stocks tumble
A s expected, Wall Street has taken a tumble at the opening bell as concerns over the new Covid variant continue to take their toll.
The benchmark S&P 500 fell 1.5pc, while the Dow Jones was down 2.2pc. The Nasdaq lost 0.8pc.
Analysts have warned of thin liquidity in today’s curtailed session, with many traders still away from their desks after Thursday’s Thanksgiving celebrations.
Scottish tidal energy firms welcome £300m boost
A pair of tidal energy firms operating in Scotland have welcomed a £300m funding boost from the Government.
Nova Innovation and Atlantis Energy hailed the move to set up a £20m-a-year ringfenced budget for tidal stream technology, available for 15 years under the Contracts for Difference (CfD) scheme.
A spokesperson for Nova Innovation said: “This £300m investment signals the UK Government’s confidence in the role tidal energy can play in delivering net zero carbon targets.
“It creates a clear route to market for UK tidal energy companies like Atlantis and Nova that will create thousands of jobs across our coastal communities.”
Simon Forrest, chief executive of Nova Innovation, said he was delighted that tidal stream energy has been recognised by the Government “as a core part of the UK’s green industrial revolution”.
National Grid to review power balancing as payments soar
N ational Grid will carry out a review of how it pays to balance the market as power stations demand increasingly high prices to provide electricity.
The grid operator uses the balancing market to fine-tune supply and demand, with power generators paid to increase output when supplies are stretched or turn it down when they’re not needed.
Companies including EDF, SSE and Drax have been able to demand increasingly high prices recently to help plug gaps in supply amid low wind.
National Grid said: “In recent weeks there have been some very high-cost days in the balancing mechanism. As those costs are ultimately borne by consumers it is important to fully understand the factors driving the market.”
Covid worries: “Markets don’t like uncertainty”
S ome analysts today believe markets have overreacted to the news of a new coronavirus variant , given how little we still know about it.
But it is precisely this lack of knowledge that has spooked markets so much, say others, because it throws into doubt expected tightening by central banks and raises the prospect of yet more disruption.
Peter Rutter , head of equities at Royal London Asset Management, says:
This news is putting the handbrake on markets. This could be the moment that people look back on as derailing the economic recovery and rate rises. What we have is a big insertion of uncertainty rather than something material but markets don’t like that.
The very fact we don’t know, is what’s concerning the market. There is a huge range of outcomes that can happen. We could have serious lockdowns or we get no lockdowns and a booming economy.
US markets predicted to fall as traders gripped by virus fears
I nvestors are braced for a post-Thanksgiving selloff when the opening bell sounds in Wall Street today.
Tumbling stocks in Asia and Europe do not bode well for those in New York, which have been down in pre-market trading.
It comes as the World Health Organization and scientists in South Africa are scrambling figure out how quickly the new B.1.1.529 coronavirus variant can spread and whether it's resistant to vaccines.
The worries add to a wider picture that also includes concerns about inflation, an anticipated winding down of support from the Federal Reserve and slowing growth.
Ipek Ozkardeskaya, a senior analyst at Swissquote, told Bloomberg:
It's terrible news. The new Covid variant could hit the economic recovery, but this time, the central banks won't have enough margin to act. They can't fight inflation and boost growth at the same time. They have to choose.
Carl Dooley, the head of European, Middle East and Africa trading at Cowen, added:
This is a big shock for people waking up (and) seeing the news.
Uncertainty and fear will remain high and maybe we aren't going back to new highs straight away.
The New York Stock Exchange and the Nasdaq are operating on shortened hours today, from 9.30am to 1pm.
T ime for a lunchtime check on the FTSE 100 after this morning’s brutal sell-off.
The blue-chip index has pared back losses marginally to trade down 2.6pc. That’s still £52bn wiped off the exchange, though, and it’s on track for its worst day since September 2020.
Travel and leisure stocks have recorded the most dramatic falls, with British Airways owner IAG now down 14pc. Hotel groups InterContinental and Whitbread have shed 7pc.
Banking stocks HSBC , Lloyds and Barclays have also fared badly as traders scale back their expectations for a Bank of England interest rate hike.
The domestically-focused FTSE 250 is down 2.2pc, faring only a little better than its blue-chip counterpart, with trading platforms Plus500 and CMC Markets pushing higher.
Google makes pledges on cookies reform to appease watchdog
T he competition watchdog will appoint a monitor to keep tabs on controversial changes to Google's Chrome web browser after the company promised the overhaul would not give its advertising business an unfair advantage.
James Titcomb has more details:
Google has committed to ensuring that an upcoming privacy change to Chrome does not tighten its grip on the online advertising market following an investigation by the Competition and Markets Authority (CMA).
The search giant said it will help rivals manage the change and by ringfencing data that would give its advertising business an advantage.
The CMA has been investigating Google’s plans to block "third party cookies", pieces of code that advertisers use to track individuals around the web and target adverts. Google plans to replace this with its own technology, known as Privacy Sandbox, that it said will allow adverts to be targeted while preserving personal data.
Chrome is the world's most popular browser. Advertising companies had warned that the changes would allow Google to enjoy outsized power to target adverts, while leaving rivals blind.
On Friday, the CMA said it had secured commitments from Google that included providing regular reports to the regulator on the changes, and appointing a regulator-approved trustee to manage the changes.
Lidl UK chief to step down
E lsewhere, there’s a major management reshuffle at Lidl.
Christian Hartnagel, chief executive of the supermarket chain’s British business, will step down next year to take the helm of Lidl’s German operations.
His current deputy chief executive, Ryan McDonnell, will take over as the British division’s new chief next year.
Mr Hartnagel has led Lidl’s UK operations for the last five years, expanding its presence on high streets and increasingly eating away market share from Big Four rivals Tesco, Sainsbury’s, Morrisons and Asda.
The surprise departure comes just two days after he set out a new long-term growth plan for Lidl GB.
Bosses at the retailer said they expect to reach their original target of having 1,000 stores by 2023 and set a new ambition for 1,100 sites by 2025.
Wall Street drops on Covid variant fears
W all Street is poised to drop sharply this afternoon, following on from major losses for markets across Europe and Asia.
Futures tracking the Dow Jones have tumbled 2.3pc, while the S&P 500 and Nasdaq are down 1.9pc and 1.2pc respectively.
It comes as the discovery of a new strain of Covid rattles markets ahead of a shortened post-Thanksgiving trading session.
Major airlines dropped between 5pc and 6pc in premarket trading, as the new variant detected in South Africa prompted the EU, UK and India to roll out travel bans.
Cruise operators Carnival and Royal Caribbean Cruises plunged about 9pc each.
Wall Street banking titans including Bank of America , Citigroup , JPMorgan , Goldman Sachs , Wells Fargo and Morgan Stanley fell between 3pc and 4pc as traders pared back their recent bets on interest rate hikes.
‘Fear gauge’ surges as Covid sparks volatility
A key Wall Street index dubbed the ‘fear gauge’ has recorded its sharpest jump since the beginning of the year as investor jitters mount over the new Covid variant.
The Vix index, which measures expectations of volatility in US stocks over the next month, leapt 38.3pc to 25.7 – its biggest move since January 27.
Extinction Rebellion targets Amazon depots on Black Friday
I t may be a Black Friday for markets, but for retailers that term has a very different meaning.
Amazon was the first company to bring the shopping bonanza to Britain, but now it’s finding itself at the heart of climate protests up and down the country.
Extinction Rebellion has targeted 13 of the ecommerce giant’s warehouses in protest at what it deems the epitome of obsessive overconsumption.
Activists have blocked a string of depots in locations including Manchester, Newcastle and Bristol.
The group said:
Black Friday epitomises an obsession with overconsumption that is not consistent with a liveable planet,” the group said.
Amazon and companies like it have capitalised on our desire for convenience and stoked rampant consumerism at the expense of the natural world.
Traders cut interest rate bets
M y colleague Louis Ashworth has some more details on how the new Covid variant is impacting traders’ expectations of an interest rates rise.
Money markets priced in a 70pc chance officials will vote to increase the cost of borrowing on December 16th, which had been pegged as a certainty as recently as yesterday.
Emmanuel Cau, head of European equity strategy at Barclays, said a pullback in stocks was "logical" given many markets have been pushing all-time highs.
He said: "What is key is to find out whether current vaccines remain effective against the variants, or not. Covid uncertainty might force central banks to err on the side of caution."
Nigel Green, from asset manager deVere Group, said equity markets would eventually shrug off the drop, as they did after the Delta variant rose to prominence earlier this year.
He said: "This wobble is likely to be temporary with markets remaining bullish for the time being."
Liquidity is likely to be thin when US markets open as many traders are still away from their desks following Thanksgiving on Thursday, with the New York Stock Exchange only opening for a half day.
UK to beat China for economic growth for first time since Chairman Mao
A touch of positive economic news now to counteract this morning’s woes…
Britain's economy is set to grow more quickly than China’s for the first time since the death of Mao Zedong as the world's second-largest economy slumps to its worst performance in more than 30 years.
Tim Wallace reports:
The UK is expected to sustain its strong rebound from Covid with growth of 5.4pc in 2022, according to analysts at BNP Paribas.
By contrast China is set to grow by 5.3pc, according to the forecasts calculated before the emergence of the new Covid variant.
It will be the first time Britain has expanded faster than the Asian titan since 1976, the year of Chairman Mao's death.
China was the first big economy to rebound to its pre-Covid GDP, but now Beijing's iron-fisted zero Covid policy is expected to hold the country back as the nation's factories and ports are routinely forced to shut by new outbreaks.
A crunch in the property market, centred around troubled developer Evergrande, will also remove a key driver of growth.
FTSE on track for worst day in more than a year
T o put today’s decline into context, the FTSE 100 is currently on track to record its worst day in more than a year.
Falls of as much as 3.4pc mean the blue-chip index is facing its worst session since September 2020, when it dropped 2.6pc amid concerns about a second wave of Covid.
While the market reaction appears to be history repeating itself, some analysts are less concerned about the threats this time around.
Economist Thomas Hirst says we “know the playbook now”, making it easier to think through scenarios. Still, uncertainty is anathema to markets, and that’s played out in today’s drop.
Market response to new variant story on Friday of Thanksgiving week is not necessarily surprising. But we know the playbook now so easier to think through the scenarios I think. In EUR credit markets, higher beta asset classes gapping out but long-end holding up. Seems reasonable
— Tomas Hirst (@tomashirstecon) November 26, 2021
Bitcoin loses a fifth of value since September highs
F or many investors, cryptocurrencies have offered an attractive, inflation-resistant alternative to traditional assets. But in times of crisis, it seems, volatile digital coins are not quite so appealing.
Bitcoin tumbled almost 8pc this morning as investors dumped riskier assets and fled to safe haven assets such as bonds, the yen and the dollar.
The cryptocurrency fell as much as 7.8pc to $54,377, its lowest level since October 12.
The latest decline means Bitcoin has slumped by more than a fifth since hitting a record high of almost $70,000 earlier this month.
Ether, the second biggest by market capitalisation, slumped as much as 11.6pc to its lowest in a week.
Read more on this story: World watches through its fingers as El Salvador bets on Bitcoin
Expert reaction: ‘Noisy and difficult’ pricing in of restrictions
C hris Beauchamp , chief market analyst at IG, says:
European markets have seen most of the gains made in the course of October and November evaporate overnight as investors around the globe react to the new Covid variant that has appeared in South Africa. Early reports suggest it spreads quickly and could be much more resistance to existing vaccines.
While the situation appears confined to the region for now, markets are scrambling to price in a return of restrictions across the globe, taking their cue from the UK's travel restrictions and the tighter restrictions imposed in Portugal.
This process is always a noisy and difficult one, and has been exacerbated by the lack of liquidity that is always a feature of markets around Thanksgiving.
Already some pockets of strength (or less weakness perhaps) have emerged, with Nasdaq futures holding up better than the rest as investors there hold their nerve, but perhaps some of the early moves today will be reversed if a more optimistic tone prevails into this afternoon and next week.
Oil keeps sliding amid demand fears
O il prices are firmly in negative territory this morning amid concerns the new Covid variant could dent global demand over the winter.
Brent crude has dropped 5.6pc to below $78 a barrel, while West Texas Intermediate has plunged 6.8pc to just over $73.
Oil analyst Keshav Lohiya told Bloomberg: "With little known about it, the market is right to be panicked. However this is a cat-and-mouse game between vaccines and variants."
It comes ahead of a key meeting of Opec+ to decide production policy for January. The group has clashed with major oil consumers including the US after they announced a coordinated release of strategic reserves to help tame prices.
Opec has repeatedly resisted calls to accelerate output, leading to accusations from the International Energy Agency that it was creating “artificial tightness” in the market.
But today’s fall in prices will add fresh complications over demand forecasts as the spectre of tighter restrictions looms.
Thin liquidity sparks big market moves
A small word of caution now to put this morning’s plunge into context.
Yesterday’s Thanksgiving holiday in the US has left liquidity thin, with many traders still away from their desks. As a result, today’s big market movements could be more accentuated.
Sterling drops below $1.33 for first time this year
S terling briefly dropped below $1.33 for the first time since December 2020 as the currency got caught up in a wider exodus from riskier assets.
The pound fell as low as $1.3278, before recovering ground to trade at $1.3331. Against the euro it dropped 0.6pc to 84.65p.
ING analysts said: “London is naturally highly exposed to new strains given its high volume of travellers, and markets will be on the lookout in the coming days for any evidence the new variant has already reached UK, with obvious downside risks for the pound.”
Expert reaction: Markets to shrug off new variant
A mid panic about the new Covid variant, some analysts are more sanguine about the prospects for markets.
Nigel Green , chief executive of deVere Group, reckons the new strain will spark a temporary wobble but will soon be shrugged off.
Experts are determining whether the new variant is more transmissible or more deadly than previous ones.
The fact that a new strain has been discovered and, critically, that at this stage we know little about it has caused jitters in the financial markets, which loathe uncertainty. The headlines have caused a knee-jerk reaction.
In addition, Wall Street was closed yesterday meaning that a large bulk of global trades were missing, making other moves more pronounced.
This wobble is likely to be temporary with markets remaining bullish for the time being.
Traders pull back bets on interest rates rise
M oney markets have pulled back their bets on a Bank of England interest rate rise as fresh Covid concerns fuel speculation central banks could slow their pace of tightening monetary policy.
Traders are now pricing in less than 10 basis points of interest rate rises in December. They’re also expecting an increase of less than 25bp in February.
Investors flock to deliveries and sanitiser
T here 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
I t 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
U nsurprisingly, 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
T here’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
R ight, 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
I t 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
A s 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
T he 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
O il 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?
T he 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
I t 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
G ood morning.
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)
- Stocks and Bitcoin take fresh hits as cocktail of worries combine to hit markets
- Your commitment at an uncertain time has set example: Graeme Smith thanks BCCI for successful tour
- Biden's pandemic fight: Inside the setbacks of the first year
- India's Omicron wave may intensify in coming weeks, say experts
- VIETNAM NEWS HEADLINES JANUARY 21
- Why effort to help Afghanistan is falling short
- Schools reopen in Maha; govt hopes students will enjoy being back to classrooms
- Real estate sector sentiment at all-time high in Q4 2021, shows report
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