FTSE 100 suffers year's worst session on virus scare

Reuters

Published Nov 26, 2021 08:26

Updated Nov 26, 2021 16:56

By Bansari Mayur Kamdar

(Reuters) -The UK's blue-chip share index slumped on Friday, suffering its biggest drop in more than a year as fears over a newly detected and possibly vaccine-resistant coronavirus variant gripped stock markets around the world.

The FTSE 100 index closed down 3.7% at its lowest in more than seven weeks, with commodity, travel, and banking stocks leading the sell-off.

Britain said the virus variant spreading in South Africa was considered by scientists to be the most significant one found yet and it needed to ascertain whether it rendered vaccines ineffective.

Tourism group TUI (LON:TUIT) fell almost 10% while airline companies like Wizz Air (LON:WIZZ), easyJet (LON:EZJ) and British Airways-owner IAG (LON:ICAG) lost around 15% after UK authorities imposed travel restrictions from South Africa and five neighbouring countries.

"We don't know so much about this variant yet but if it's serious, it could change the macro scenarios altogether," said Roland Kaloyan, head of European equity strategy at Societe Generale (PA:SOGN).

"The Bank of England will not hike rates in a period where we can enter lockdown and put serious burden on the economy."

Supply-chain worries and inflationary pressures have kept the FTSE 100 under pressure, with the blue-chip index lagging its European peers so far this year.

Shares of major UK lenders HSBC, Lloyds (LON:LLOY) Bank and Barclays (LON:BARC) all fell almost 5% as investors scaled back expectations for an interest rate hike in December. [GBP/]

"Over the last month, the banking sector has benefited from a steeper yield curve but with the news today we see a lower bond yield and that's also not quite positive for the long term," said Kaloyan.