Stock markets around the world fall in fears of new Covid-19 strain

Stock markets across the world fell on fears that the new Covid strain could hamper economic recovery.

London’s FTSE 100 tumbled by 2.7% while leading stock market indexes in Germany and France both fell by more than 3%. It followed similar declines on stock markets in Japan and Hong Kong overnight.

A number of other countries such as Germany, Italy and Israel have banned flights from the six southern African nations.

European Commission president Ursula von der Leyen tweeted that other EU nations should also “activate the emergency brake” to stop travel from these countries.

The UK banned flights from South Africa, Namibia, Zimbabwe, Botswana, Lesotho and Eswatini until 04:00 GMT on Sunday.

“Fear has gripped the financial markets with the travel industry flying into another violent storm,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“With Europe still battling with the surge of a fourth wave of the virus, there are now fears that the highly mutated Covid strain discovered in states in Southern Africa will prompt fresh shutdowns around the world in an attempt to stop its spread, leading to another drag on recovery.”

Oil prices also fell on fears the new Covid strain could lead to restrictions and dampen demand. Brent crude dropped by 4.9% to $78.15 a barrel.

“The drop in the oil price is the market’s way of saying it is worried about a reduction in economic activity,” said Russ Mould, investment director at AJ Bell.

But he said: “The flipside of falling commodity prices is that a weaker oil price should provide some relief in terms of inflationary pressures.

“That may cause central banks to be more cautious towards raising rates in the near-term, however it does depend on whether the new Covid strain causes significant disruption or can be contained as best as possible in a rapid manner.”

UK Health Secretary Sajid Javid said scientists were “deeply concerned” about the new Covid variant but more needed to be learned about it.

However, he said the variant had a significant number of mutations, “perhaps double the number of mutations that we have seen in the Delta variant”.