London close: Stocks sink on fears of new Covid variant
London’s equity markets closed well below the waterline on Friday, with travel shares under the cosh as investors were spooked by a new Covid variant found in South Africa.
The FTSE 100 ended the session down 3.64% at 7,044.03, and the FTSE 250 was 3.19% weaker at 22,537.89.
Sterling was also in the red, last trading 0.04% weaker against the dollar at $1.3317, and losing 0.89% from the euro to change hands at €1.1779.
“The Black Friday sales have extended to global stocks today, with a huge risk-off move sparking weakness across the board for equities,” said IG senior market analyst Joshua Mahony.
“Fears around the new variant found in South Africa bring concern that we could be on the cusp of yet another wave of infections and subsequent restrictions.”
Mahony said that understandably, travel stocks were at the forefront of the selloff, with European nations already laying out plans to restrict flights from countries that had reported cases of the new Covid strain.
“However, market losses have been widespread, with the prospect of future restrictions bringing caution for most of the so-called reopening stocks.”
Authorities in the UK and a number of other European countries moved quickly to cut travel links with South Africa and several other places in the continent earlier in the day, following the detection of a new variant of Covid-19 with a large number of mutations on the so-called 'spike' protein.
The fear was that the large number of mutations might make the virus more transmissible and allow it to better evade vaccines.
“We are concerned that this new variant may pose substantial risk to public health,” said Saijd Javid, the Secretary of State for Health and Social Care.
Although he conceded that there was no hard data yet, he went on to add: "Early indications show this variant may be more transmissible than the Delta variant, and current vaccines may be less effective against it.
“It may also impact the effectiveness of one of our major treatments, Ronapreve.”
The variant, which had been classified as B.1.1.529, had roughly 50 mutations, including 30 on the spike protein and 10 on its receptor, Guillermo Martínez de Tejada, a professor of Microbiology at the University of Navarre, told Spanish daily ABC.
Tests to determine just how transmissible and dangerous the variant was were expected to take at least two weeks.
Elsewhere in economic news, UK car manufacturing fell 41.4% year-on-year in October, with just 64,729 vehicles rolling off production lines, making it the industry's worst October since 1956.
According to the Society of Motor Manufacturers and Traders, the main cause for the weak level of production was the ongoing global semiconductor shortage, which was also compounded by the closure of Honda's Swindon factory towards the end of July.
Production for domestic and overseas markets was down 37.9% and 42.1%, respectively. Of all cars built in the UK in October, 80% were shipped abroad, with 60% of that number destined for EU countries.
However, EU shipments fell 29.2%, while the number of cars sent to Japan and the US fell 57.1% and 67%, respectively.
“These figures are extremely worrying and show how badly the global semiconductor shortage is hitting UK car manufacturers and their suppliers,” said SMMT chief executive Mike Hawes.
“Britain's automotive sector is resilient, but with Covid resurgent across some of our largest markets and global supply chains stretched and even breaking, the immediate challenges in keeping the industry operational are immense.”
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%, WH Smith was 14.38% weaker, and travel caterer SSP was in the red by 16.12%.
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.
Other stocks that had previously benefited from stay-home orders were also in the green, with miniature wargames manufacturer Games Workshop up 3.18%, Pets at Home rising 1.74%, and online electricals retailer AO World closing 1.01% higher.
FTSE 100 - Risers
Ocado Group (OCDO) 1,829.00p 4.57%
B&M European Value Retail S.A. (DI) (BME) 626.20p 1.13%
Croda International (CRDA) 9,902.00p 1.04%
United Utilities Group (UU.) 1,095.50p 0.78%
Polymetal International (POLY) 1,372.50p 0.62%
Bunzl (BNZL) 2,827.00p 0.46%
Halma (HLMA) 2,975.00p 0.30%
Avast (AVST) 601.80p 0.13%
Severn Trent (SVT) 2,895.00p 0.07%
SEGRO (SGRO) 1,400.00p 0.00%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 131.40p -14.85%
Rolls-Royce Holdings (RR.) 122.28p -11.09%
Melrose Industries (MRO) 144.30p -10.26%
Standard Chartered (STAN) 411.60p -8.88%
Whitbread (WTB) 2,836.00p -8.75%
InterContinental Hotels Group (IHG) 4,609.00p -8.59%
Intermediate Capital Group (ICP) 2,109.00p -8.30%
Compass Group (CPG) 1,453.50p -8.24%
Informa (INF) 470.20p -8.16%
Prudential (PRU) 1,307.00p -7.93%
FTSE 250 - Risers
Games Workshop Group (GAW) 9,260.00p 3.18%
Pets at Home Group (PETS) 480.40p 2.21%
IG Group Holdings (IGG) 772.50p 1.38%
Centamin (DI) (CEY) 95.40p 0.76%
Pennon Group (PNN) 1,241.00p 0.65%
AO World (AO.) 109.60p 0.64%
Dunelm Group (DNLM) 1,366.00p 0.59%
Plus500 Ltd (DI) (PLUS) 1,275.00p 0.35%
Contour Global (GLO) 187.00p 0.32%
Cranswick (CWK) 3,558.00p 0.23%
FTSE 250 - Fallers
Carnival (CCL) 1,182.80p -16.04%
SSP Group (SSPG) 216.10p -15.65%
Wizz Air Holdings (WIZZ) 3,735.00p -15.09%
WH Smith (SMWH) 1,311.00p -14.31%
easyJet (EZJ) 496.70p -12.00%
Network International Holdings (NETW) 279.10p -11.98%
Capita (CPI) 43.60p -10.64%
TUI AG Reg Shs (DI) (TUI) 198.50p -10.50%
Greencore Group (CDI) (GNC) 121.80p -9.98%
C&C Group (CDI) (CCR) 224.00p -9.24%