Travel and oil stocks hit as new COVID variant spooks markets

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Airbus A320 British Airways. Aircraft to Fiumicino Leonardo da Vinci Airport. Fiumicino (Italia), November 11st, 2021 (Photo by Massimo Insabato/Archivio Massimo Insabato/Mondadori Portfolio via Getty Images)
Travel, leisure and hospitality stocks were some of the biggest fallers on Friday, as well as oil producers, as a new COVID-19 variant sparked concern across the globe. Photo: Massimo Insabato/Archivio Massimo Insabato/Mondadori Portfolio via Getty Images

Travel, leisure and hospitality stocks were some of the biggest fallers on Friday, as well as oil producers, as a new COVID-19 variant sparked concern across the globe.

The B.1.1529 strain, which has been reported as a new, more transmissible, variant of coronavirus, is said to contain up to 30 identified mutations. It was first identified in South Africa, and has since also been detected in Hong Kong.

The news sent British Airways owner IAG (IAG.L) plummeting as much as 20% on the day to its lowest level since November 2020, it has recovered slightly and is now trading 10% lower.

Easyjet (EZJ.L) has also lost a tenth of its value, while Ryanair (RYA.L) and Wizz Air (WIZZ.L) are both down 7%, and jet engineer Rolls Royce (RR.L) shed 10%. On the bloc, Lufthansa (LHA.DE) slipped more than 10%, and Air France (AF.PA) lost 7.6%.

IAG fell to its lowest level since November last year, before paring back some losses. Chart: Yahoo Finance
IAG fell to its lowest level since November last year, before paring back some losses. Chart: Yahoo Finance

Brent Crude futures (BZ=F) also plummeted 4.8% to below $80 (£60) a barrel on the back of the news, while another key benchmark West Texas Intermediate (WTI) slumped 4% to below $75 a barrel.

This sent shares in oil giants such as Shell (RDSB.L) and BP (BP.L) more than 6% lower in London.

Jeffrey Halley, a senior analyst at brokerage OANDA, said: “All we know so far is the B.1.1.529 is heavily mutated but markets are taking no chances, equities are falling, haven currencies such as the US dollar, Japanese Yen and Swiss Franc are rallying, commodity currencies such as the Canadian dollar, Australian dollar and New Zealand dollar are being sold, US 10-year bond yields have moved sharply lower, and oil has slumped.”

Officials from the World Health Organization (WHO) called an emergency meeting to discuss what the new strain means for vaccine efficacy as well as other treatments.

UK health secretary Sajid Javid said the new variant "may be more transmissible" than the Delta strain and added that "the vaccines that we currently have may be less effective".

Meanwhile, a scientist on the UK's Joint Committee on Vaccination and Immunisation has warned that the public needs to be ready for new restrictions in the wake of the discovery.

Read more: Global stock markets crash as new COVID variant spooks investors

The UK government has already implemented flight bans from six African countries over concerns on infection rates, with South Africa, Namibia, Lesotho, Botswana, Eswatini and Zimbabwe all placed on England’s travel red list.

No cases of the new variant have been detected in the UK, however, hundreds of people who have recently returned from South Africa and neighbouring countries are expected to be tracked down and offered tests.

The EU set to follow suit with a similar flight ban. Taking to Twitter on Friday, Ursula von der Leyen, president of the European Commission (EC), said it “will propose, in close coordination with member states, to activate the emergency brake to stop air travel from the southern African region due to the variant of concern”.

Nigel Green, chief executive of deVere Group, said: “Experts are determining whether the new variant is more transmissible or more deadly than previous ones.

“The fact that a new strain has been discovered and, critically, that at this stage we know little about it has caused jitters in the financial markets, which loathe uncertainty. The headlines have caused a knee-jerk reaction.”

He added: “This wobble is likely to be temporary with markets remaining bullish for the time being.”

Watch: Should I book a holiday in 2021?

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