Stock markets around the world plunged on Friday as investors sold off shares, commodities and cryptocurrencies amid concerns that a new coronavirus variant, described as potentially the worst so far identified, could usher in a fresh wave of global pandemic restrictions.
The FTSE 100 suffered its biggest one-day fall since June last year when the pandemic was still in its first phase, closing down 3.6% – knocking £72bn off the value of companies on the index of blue-chip stocks. On Wall Street, the Dow Jones industrial average dropped 2.5% by the close.
The threat of stricter travel restrictions meant aviation and tourism stocks were among the worst hit, while Brent crude oil tumbled by 10% to $73.45 per barrel.
Among the largest London-listed stocks, the British Airways owner, IAG, was the day’s biggest faller, losing nearly 15% of its value, while Rolls-Royce fell by 11%. Travel-related companies also fared badly on the FTSE 250, with the cruise operator Carnival losing 16% and easyJet falling by 11%.
The new B.1.1.529 variant, identified on Tuesday, is feared to be more transmissible, posing a threat to current vaccines. It prompted the UK government to put six southern African countries back on England’s travel red list on Thursday night.
“Markets are clearly speculating that a rapid spread of a more brutal Covid strain could once again derail the global economy,” said Russ Mould, investment director at AJ Bell.
Travel and aviation suffered the biggest falls on the news that flights from South Africa, Namibia, Zimbabwe, Botswana, Lesotho and Eswatini are to be suspended from midday on Friday. Officials are also reviewing a number of travel measures, including whether there should be a limited reintroduction of the use of PCR tests for arrivals.
However, the sell-off extended to other sectors and US stock markets followed their European counterparts down, with the Dow Jones industrial average registering a fall of 2.5% by mid-morning on Wall Street.
Even alternative assets such as digital currencies suffered significant declines, with bitcoin down 7% and ethereum, the world’s second-largest cryptocurrency, down 9%.
“Fear has gripped the financial markets, with the travel industry flying into another violent storm after the discovery of a new Covid strain which could be far more contagious and may render vaccines less effective,” said Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown.
The health secretary, Sajid Javid, said the British government and scientists were “deeply concerned” about the B.1.1.529 variant, which is differentiated from the original strain by more than 50 mutations. “That would suggest that it may well be more transmissible and the current vaccines that we have may well be less effective,” Javid said.
While only 59 cases have been identified so far, and none in the UK, one scientist described the new variant as “the worst we’ve seen so far”.
Fears that the B.1.1.529 variant could hit the global recovery sent the oil price plunging, too. Brent crude fell 4.5% to $78.31 (£58.75) a barrel.
Last week, almost £2bn was wiped off the value of UK airlines and travel-related companies after Austria’s decision to order a national lockdown stoked fears of the introduction of new pandemic restrictions across Europe.