Covid variant fears spook markets as FTSE plummets

The FTSE 100 has seen its biggest fall since March 2020 as investors worry about a new variant of the Covid virus in southern Africa.

The UK announced on Thursday it will stop all direct flights from South Africa, Namibia, Zimbabwe, Botswana, Zimbabwe, Lesotho and Eswatini due to a surge in cases identified with the new mutation.

In the City, the FTSE 100 index had dropped by as much as 259 points, or 3.5%, at its lowest on Friday morning.

The index recovered somewhat later in trading, but was still on track for its worst performance this year.

The collapse in London was led by airlines and Rolls-Royce, which makes plane engines.

British Airways owner IAG and cruise line Carnival had both lost more than 10% of their market value. EasyJet, Tui and Wizz Air were not far behind.

But less obvious victims of the new travel restrictions were also among the heavy losers.

The worry that office workers might switch back to working from home and ditch their lunchtime supermarket sandwiches hit Greencore Group, which makes those sandwiches for the supermarkets.

However Greencore’s chief executive announced plans to step down on Thursday afternoon, which might also be affecting shares.

Investec, which has its headquarters in South Africa, was also a major loser.

“Forget Black Friday; today has been renamed Red Friday after the colour of share price screens as stocks slump globally on fears over a new Covid strain,” said Russ Mould, investment director at AJ Bell.

“Headlines calling it the ‘worst-ever variant’ have caused investors to panic and dump shares in travel-related stocks for fear that we’re going to see tough travel restrictions once again.

He added: “The drop in the oil price (is) the market’s way of saying it is worried about a reduction in economic activity, something which also explains the slump in metal prices.

“Markets are clearly speculating that a rapid spread of a more brutal Covid strain could once again derail the global economy. Banking stocks were also weak as they are closely tied to economic activity.”

But he also added that the drop in commodity prices might slow down global inflation, which has been running high in recent months.

In Germany, France and Asia, some of the main markets had also dropped by more than 2%.