Travel and oil stocks hit as new COVID variant scares markets
Travel, leisure and hospitality stocks were among the biggest on Friday, along with oil producers, as a new variant of COVID-19 raised concerns around the world.
Strain B.1.1529, which has been reported as a new, more transmissible variant of the coronavirus, is believed to contain up to 30 identified mutations. It was first identified in South Africa and has since been detected in Hong Kong as well.
The news sent British Airways owner IAG (IAG.L) down 20% on the day to its lowest level since November 2020, has recovered slightly and is now trading 10% lower.
Easyjet (EZJ.L) also lost a tenth of its value, while Ryanair (RYA.L) and Wizz Air (WIZZ.L) are both down 7%, and jet engineer Rolls Royce (RR. L) lost 10%. On the block, Lufthansa (LHA.DE) slipped more than 10% and Air France (AF.PA) lost 7.6%.
Brent Crude futures (BZ = F) also fell 4.8% to below $ 80 (£ 60) a barrel in the wake of the news, while another key benchmark, the West Texas Intermediate (WTI) fell 4% to less than $ 75 a barrel.
This caused the shares of oil giants such as Shell (RDSB.L) and BP (BP.L) in London to fall by more than 6%.
Jeffrey Halley, Senior Analyst at OANDA Brokerage, said: “All we know so far is that B.1.1.529 is shifting heavily, but markets are taking no risk, stocks are down. , safe-haven currencies such as the US dollar, Japanese yen and Swiss franc recover, commodity currencies such as Canadian dollar, Australian dollar and New Zealand dollar are sold, US bond yields to 10 years have fallen sharply and oil has collapsed.
Officials from the World Health Organization (WHO) have called an emergency meeting to discuss what the new strain means for the effectiveness of the vaccine as well as other treatments.
UK Health Secretary Sajid Javid said the new variant “may be more transmissible” than the Delta strain and added that “the vaccines we have now may be less effective”.
Meanwhile, a scientist from the UK’s Joint Committee on Vaccination and Immunization has warned the public must be prepared for further restrictions in the wake of the discovery.
Read more: Global stock markets collapse as new variant of COVID scares investors
The UK government has already put in place flight bans from six African countries over concerns over infection rates, with South Africa, Namibia, Lesotho, Botswana, Eswatini and Zimbabwe all being placed on the red list for trips to England.
No cases of the new variant have been detected in the UK, however, hundreds of people who recently returned from South Africa and neighboring countries are expected to be tracked down and offered testing.
The EU is set to follow suit with a similar flight ban. Speaking to Twitter on Friday, Ursula von der Leyen, President of the European Commission (EC), said she “will propose, in close coordination with Member States, to activate the emergency brake to stop air travel from the Southern African region due to the variant of concern ”.
Nigel Green, Managing Director of deVere Group, said: “Experts are determining whether the new variant is more transmissible or more deadly than the previous ones.
“The fact that a new strain has been discovered and, more importantly, that at this stage we know little about it, has caused nervousness in financial markets, which hate uncertainty. The headlines elicited a knee-jerk reaction.
He added: “This swing is likely to be temporary, with markets remaining bullish for now.”
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