London midday: Stocks tumble as Covid, Brexit worries rattle investors
London stocks had tumbled by midday on Monday, along with the pound, as investors were rattled by a new strain of Covid-19, a UK travel ban, border chaos and a missed Brexit deadline.
The FTSE 100 was down 2.7% at 6,350.56, with heavy losses on the Continent too - the benchmark Stoxx Europe index was 2.9% lower at 384.39 - and US futures pointing to a sharply lower open.
Sterling slid 1.9% versus the dollar to 1.3271 and 1% against the euro to 1.0899 as Brexit talks missed Sunday’s deadline and were set to continue after EU negotiator Michel Barnier said they had reached a "crucial" stage.
Covid concerns also weighed heavily on sentiment after London and the South East were plunged into tougher Tier 4 restrictions over the weekend due to a new strain of the virus. This was compounded by a travel ban as a number of countries such as France, Italy, the Netherlands, Belgium and Germany halted flights from the UK, all due to the new Covid variant.
In addition, France closed its border to all traffic including freight overnight, causing the Port of Dover and the Eurotunnel to shut overnight.
UK Transport Secretary Grant Shapps insisted earlier that the UK will not ask for an extension to the Brexit transition period, despite chaos at UK ports.
The World Health Organisation confirmed that the new strain of Covid, which is said to be up to 70% more transmissible, was first identified in the South East of England in September. It has also been identified in other countries such as The Netherlands and Denmark.
Neil Wilson, chief market analyst at Markets.com, said: "No Brexit deal, a new strain of the coronavirus, stricter lockdowns and the closure of key trade routes to the EU: Merry Christmas everyone.
"First up sterling and it’s been a very rough start to the Christmas week for the pound, as the lack of a Brexit deal and the closure of key freight routes to Europe knocked sentiment. Brexit talks continue today but key sticking points remain."
Wilson said "the pound remains on the hook for a severe downside shock if there is no deal by Christmas".
"This is the kind of near-term volatility we can expect until the full force of vaccines is felt. There has been a lot of hope already priced in with the vaccine-inspired November rally so we cannot expect a straight line higher for stocks. Unfortunately, tougher Tier 4 restrictions may be in place until the spring, so corrections of this nature are to be expected. The cavalry may be coming but the homesteaders need to batten down the hatches and face another onslaught before they arrive."
Amid the doom and gloom, a bright spot from across the pond - US legislators finally agreed on a $900bn Covid package - did nothing to lift the mood.
Unsurprisingly, stocks with large exposure to the Covid-19 pandemic and related restrictions suffered the brunt of the selling, with British Airways owner IAG, budget airline easyJet and Wizz Air all sharply lower. Engine maker Rolls-Royce and GKN owner Melrose Industries were also under the cosh.
BP and Shell gushed lower as oil prices dropped, with Shell also in focus after saying it was writing down $3.5bn to $4.5bn in the value of its oil and gas assets next year as it assessed the current impact of the coronavirus pandemic on fourth quarter operations.
Cineworld, Carnival, Tui, pub chain Wetherspoons and WH Smith were also under pressure, while shopping centre owners British Land and Hammerson were hit hard amid worries about the impact of the closure of non-essential shops.
Mike Ashley’s Frasers Group fell sharply after saying it was pulling full-year guidance after the UK government closed non-essential retail stores in response to a new variant of the coronavirus breaking out in London and the South East.
On the upside, precious metals miners Polymetal, Fresnillo and Centamin all shone as gold prices rallied.
Metro Bank shares surged after it agreed to sell a mortgage portfolio to NatWest in a £3.1bn deal. Shares of NatWest slumped.
Online supermarket Ocado and Just Eat Takeaway - both of which have benefitted from Covid restrictions and lockdowns - were the top gainers on the FTSE 100.
Market Movers
FTSE 100 (UKX) 6,350.56 -2.74%
FTSE 250 (MCX) 19,508.90 -3.02%
techMARK (TASX) 3,964.45 -2.66%
FTSE 100 - Risers
Ocado Group (OCDO) 2,310.00p 4.57%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,188.00p 2.74%
Reckitt Benckiser Group (RB.) 6,498.00p 0.68%
Fresnillo (FRES) 1,146.50p 0.61%
Pershing Square Holdings Ltd NPV (PSH) 2,415.00p 0.42%
Admiral Group (ADM) 2,954.00p 0.37%
Polymetal International (POLY) 1,697.50p 0.09%
RSA Insurance Group (RSA) 676.20p -0.12%
GlaxoSmithKline (GSK) 1,349.60p -0.50%
Flutter Entertainment (FLTR) 14,815.00p -0.57%
FTSE 100 - Fallers
International Consolidated Airlines Group SA (CDI) (IAG) 141.55p -9.47%
Rolls-Royce Holdings (RR.) 103.90p -8.82%
Melrose Industries (MRO) 157.55p -6.91%
BP (BP.) 253.70p -6.50%
Royal Dutch Shell 'B' (RDSB) 1,254.60p -6.44%
Legal & General Group (LGEN) 240.20p -6.17%
Royal Dutch Shell 'A' (RDSA) 1,299.20p -5.94%
Land Securities Group (LAND) 628.80p -5.73%
Whitbread (WTB) 2,906.00p -5.50%
Associated British Foods (ABF) 2,127.00p -5.42%
FTSE 250 - Risers
Centamin (DI) (CEY) 124.00p 3.42%
Just Eat Takeaway.Com N.V. (CDI) (JET) 8,188.00p 2.74%
Dechra Pharmaceuticals (DPH) 3,304.00p 1.04%
Signature Aviation (SIG) 372.70p 1.03%
Allianz Technology Trust (ATT) 2,960.00p 0.85%
Essentra (ESNT) 297.00p 0.68%
Worldwide Healthcare Trust (WWH) 3,750.00p 0.54%
Monks Inv Trust (MNKS) 1,336.00p 0.45%
JPMorgan Japanese Inv Trust (JFJ) 713.00p 0.42%
Hipgnosis Songs Fund Limited NPV (SONG) 124.00p 0.40%
FTSE 250 - Fallers
Hammerson (HMSO) 22.47p -13.04%
FirstGroup (FGP) 64.45p -11.23%
easyJet (EZJ) 730.60p -10.47%
Petrofac Ltd. (PFC) 137.75p -10.29%
Frasers Group (FRAS) 426.40p -10.23%
Carnival (CCL) 1,239.00p -9.66%
Trainline (TRN) 423.20p -9.34%
Cineworld Group (CINE) 57.56p -8.14%
Rank Group (RNK) 135.80p -7.62%
WH Smith (SMWH) 1,377.00p -7.58%