Global markets fall sharply on new virus variant fears as oil prices battered

More than £65bn was wiped off the UK’s leading share index on Friday, reflecting fears that a new coronavirus variant could wreak further havoc on international business and travel.

The FTSE 100 had fallen more than 3.6% by Friday afternoon, putting it on course for its steepest one-day drop in a year.

Oil was one of the worst hit assets, with the European benchmark Brent crude crashing by more than 10% after suffering its sharpest one-day drop since April 2020.

Meanwhile, US stock indexes also opened down, with the Dow Jones Industrial Average dropping 2.4% in early trading. The S&P 500 fell by 1.74%, with travel and banking stocks hit hardest.

Shares in major airlines plummeted in London with IAG, the owner of British Airways, falling more than 21% in early trading, while EasyJet plunged 16%. The UK government said it would add six countries, including South Africa, to the red list, with flights being temporarily banned.

A number of other European countries, including Italy and Germany, were also preparing to ban travellers from the southern African countries.

Engine maker Rolls-Royce and oil giants BP and Shell were also among big fallers.

Overnight, Asian markets suffered their sharpest drop in two months after the detection of the possibly vaccine-resistant coronavirus variant.

The variant, designated as B.1.1.529 and first identified in Botswana, has a “very unusual constellation” of mutations that could help it dodge vaccine immunity and natural antibodies, scientists have said. On Friday morning, Israeli health authorities said they had detected their first case of the new variant.

Amid the hit to stocks, the pound also took a hammering, with sterling dropping below $1.33 for the first time this year as investors lose their appetite for risk.

The new variant has also prompted investors to scale back their expectations for a Bank of England (BoE) interest rate rise in December, adding to downward pressure on the pound.

European markets were all hit hard in afternoon trading, with Germany's DAX down 3.25%, and France's CAC 40 down 3.9%.

Increasingly treated as a safehaven for investors during turbulent times, digital currencies such as bitcoin and ethereum also fell more than 7.6% and 10% respectively.

Gold, a traditional investment for nervous traders, is currently in demand, as is the Swiss franc and US Treasuries, according to analysts at BayernLB.

Elsewhere, oil prices recorded their sharpest daily drop since July on news of the variant, which UK health officials said was the most significant found to date, according to scientists. There are worries that the variant could lead to a new wave of infections and travel restrictions, stifling economic growth.

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