Markets fall on Covid-19 concerns

FTSE 100 index falls 2.34% on 'Freedom Day' as rising infection rates disrupt operations

An electronic billboard shows the sell-off in shares on Hong Kong's Hang Seng Index on Monday as markets around the world faced similar issues. AP
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Stock markets around the world went through a sell-off on Monday as fears over the spread of new coronavirus variants hit markets.

In the US, the S&P500 index fell 1.6 per cent, while the Dow Jones Industrial Average sunk 2.1 per cent, or 725 points. The Nasdaq Composite declined 1.1 per cent.

The Cboe Volatility Index, or VIX, increased over 21 per cent on Monday after steady decreases to pre-pandemic numbers as some economies have reopened.

European markets also closed lower, with the EuroStoxx 50 down 2.66 per cent, France's CAC 40 index down 2.54 per cent. In Asia, the Hang Seng index closed 1.84 per cent lower, and Japan's Nikkei 225 index was down 1.25 per cent.

The sell-off is "all about the Delta variant, and investors are using this as a perfect excuse to push the markets lower", said Naeem Aslam, chief markets analyst at broker Avatrade.

In the UK, where many coronavirus restrictions were lifted on its so-called "Freedom Day", the FTSE 100 index fell 2.34 per cent. The pound also fell sharply against the dollar to $1.3673.

Far from giving investors confidence, the removal of social distancing curbs meant it evaporated as sharply rising infection rates caused disruption to operations, said Susannah Streeter, senior investment and markets analyst at stockbroker Hargreaves Lansdown.

"From retail to manufacturing and hospitality, the warnings are coming thick and fast that mandatory isolation is leading to reduced business operating hours, a drag on sales and a reduction of output," Ms Streeter said.

Oil markets also fell sharply following the Opec+ agreement on Sunday, which is set to increase supply by an extra 400,000 barrels per day.

Brent, the benchmark for two-thirds of the world's oil, dropped below $70 and was trading 6.06 per cent lower at $69.13. US gauge West Texas Intermediate fell 6.73 per cent to $66.98.

Cryptocurrencies also suffered a decline, with Bitcoin down 2.35 per cent at $30.725.44 and Ether trading 3.94 per cent lower at $1,823.37.

Analysts from Bank of Singapore said earlier on Monday that a sell-off in equity markets "cannot be ruled out" given the bull run that markets have experienced on the back of a rapid vaccine roll-out in developed markets and continuing fiscal and monetary stimulus.

The S&P 500 index is up almost 30 per cent over the past 12 months, and the Eurostoxx 50 is up nearly 17 per cent.

"We have not seen a meaningful correction in more than a year, which could set the market up for the risk of a sharp correction should the economic data ahead be less rosy than expected or if there is an unanticipated external shock," the note said.

Updated: July 19, 2021, 8:35 PM