Europe open: Shares plunge on new Covid strain, Brexit stalemate
European shares were hit hard on Monday as England battled to fight a new strain of the coronavirus leading to several countries cutting off trade and travel routes, while stalled Brexit talks also worried investors.
The pan-European STOXX 600 index slumped 2% after the UK went into lockdown in all but name and descended into chaos after the government performed yet another u-turn and pulled plans to ease curbs over Christmas.
With the discovery of a new strain of the virus up to 70% more transmissible than the original outbreak, the government shut off London, the South East and East of England at a time when millions planned to travel for the Christmas holidays.
Train stations witnessed panicked scenes on Saturday as people fled the capital ahead of the new restrictions taking effect on Sunday.
Several countries ordered a suspension of travel to the UK, including Canada, Italy, Denmark Germany and the Netherlands. France imposed a ban that included all freight carriers.
The UK’s FTSE 100 index was down 2.1% in early trade, but had pared losses to 1% even with the pound slumping 1.85% against the dollar and 1.52% versus the euro.
“The new coronavirus strain is weighing heavily on sentiment as the UK’s isolation from Europe becomes increasingly physical as well as conceptual," said Richard Hunter, Head of Markets at interactive investor.
"With some cases also being reported outside of the UK and with several countries suffering fresh spikes in cases and resorting to further lockdowns, the stark reminder is that until the vaccine rollout reaches a sufficient level, little can be done to defeat the virus."
"Against this backdrop, investors are far less likely to commit fresh capital to the market, especially in the last few trading days of the year."
Travel stocks were battered by the latest Covid-19 news, with easyJet plummeting by 10%, cruise line operator Carnival 7%, holiday firm TUI 6% and travel outlet food provider SSP down 5.7%. Aircraft engine maker Rolls-Royce was 7.15% lower.