Covid Pessimism Dampens Stock Markets

A Stock markets have fallen across the world amid deepening pessimism over a rise in Covid-19 infections, with £44bn wiped off the value of the FTSE 100 index of the UK’s leading companies on what some have called “freedom day” from pandemic restrictions in England.

The prospect of slowing global growth resulted in most stock markets across Europe experiencing significant falls, after a slide in Asia overnight that came when Indonesia reported an increase in cases and some athletes tested positive at Tokyo’s Olympic village, with the Games due to open on Friday.

In the UK the FTSE 100 closed down 2.4% at 6,844 points, its biggest one-day fall since 11 May and its lowest close since early April. In the process, £44bn was wiped off the value of FTSE 100 companies, with ITV the biggest faller, down 6.6% on fears that advertising revenues will be hit by any stalling in the UK’s economic recovery.

The widespread sell-off of shares by investors also affected travel and oil companies, banks and retailers. Shares in BP and Lloyds Banking Group ended the day down almost 5%, while the Primark owner, Associated British Foods, fell by 4% and Next by 3.4%.

Travel firms were also among the biggest fallers on London stock markets, as uncertainty about the spread of the virus fuelled concerns about further clampdowns by the Johnson administration on foreign travel arrangements. The British Airways owner, IAG, closed down more than 5% and the aeroplane engine-maker Rolls-Royce lost 6.5% of its market value.

In the FTSE 250, easyJet declined by 6.5% and the tour operator Tui was down almost 4%. The pan-European Stoxx 600 index fell 2.3%, its lowest close in two months, with Germany’s Dax and France’s Cac bourses down 2.5%.

In the US, Wall Street investors joined the stock market sell-off, with the Dow Jones industrial average down more than 2% by lunchtime in New York.

Fears that a relaxation of lockdown rules by Boris Johnson’s government would aid the spread of new variants in the UK also weighed heavily on the value of the pound, which lost ground against the euro and the dollar. Sterling dropped to $1.37, its lowest since April, and was down about 0.6% against the euro to €1.16.

Analysts said few markets were immune to the sense of trepidation that accompanied warnings from health professionals that the virus could still cause a rise in hospitalisations and harm to younger people despite higher vaccination rates.