(Alliance News) - The FTSE 100 index nosedived on Monday as a resurgence in Covid-19 cases in Europe battered stocks, with London-listed travel firms and pub operators among the worst hit by fears of tighter virus restrictions.
The FTSE 100 index was down 203.58 points, or 3.4%, at 5,803.47 midday Monday. The mid-cap FTSE 250 index was down 697.16 points, or 4.0%, at 16,872.52. The AIM All-Share index was down 2.8% at 946.51.
The Cboe UK 100 index was 3.6% lower at 577.67. The Cboe 250 was down 4.4% at 14,321.62, and the Cboe Small Companies down 2.6% at 9,126.45.
In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were both 3.2% lower Monday afternoon.
"With cases sharply rising across Europe, including a fresh daily record of 13,500 new infections for France and numbers regularly around the 4,000 mark in the UK, it seems like the continent is entering – or more likely has entered – its second wave. And with that comes the increased chance for another round of nationwide lockdowns," said Connor Campbell at Spreadex.
"The prospect of such, and the cost associated, has sent the markets into a spiral – even if there is no reason why the losses should be so pronounced today when compared to any point last week. It seems that headlines have simply reached a tipping point in the eyes of investors."
With cases in Europe on the rise, England could be heading for another lockdown.
The UK could be facing 50,000 new Covid-19 cases a day by mid-October, leading to 200 deaths a day a month later if the current rate of infection is not halted, the government's chief scientific adviser Patrick Vallance has warned.
Vallance said the "vast majority of the population remain susceptible" to catching coronavirus, and the current situation required swift action to bring the case numbers down.
In a televised press conference together with England's chief medical officer Chris Whitty, Vallance said there was "no doubt" the UK was in a situation where the numbers were increasing among all age groups.
UK Prime Minister Boris Johnson spent the weekend with senior ministers and advisers discussing what action to take as the rise in the number of new cases showed no sign of slowing. Johnson is expected to hold a press conference as early as Tuesday.
Among the measures being considered by ministers is a temporary two-week "circuit break", with tighter restrictions across England in an attempt to break the chain of transmission.
Outside of the UK, a million people in and around the Spanish capital on Monday were under new "stay-at-home" orders to contain another coronavirus surge, as the US death toll neared 200,000.
The restrictions in Madrid will last for two weeks starting Monday, affecting people living mainly in densely populated, low-income neighbourhoods who will be allowed only to travel for essential reasons such as work, medical care or taking children to school.
Wall Street is pointed to a lower start to the week, with the Dow Jones Industrial Average called down 0.7%, the S&P 500 down 1.8% and the Nasdaq Composite down 1.7%.
The dollar was higher against other major currencies as risk-off trade prevailed.
Sterling was quoted at USD1.2852 at midday, down on USD1.2949 at the London equities close on Friday. The euro traded at USD1.1783 on Monday, marginally lower than USD1.1863 late Friday.
The dollar was quoted at CHF0.9137, up from CHF0.9092.
Against the safe-haven yen, however, the dollar declined to JPY104.09 versus JPY104.41.
Amid the increasing talk of another lockdown in the UK, travel stocks were suffering in London on Monday.
British Airways-parent International Consolidated Airlines was the worst blue-chip performer at midday, down 15%. Premier Inn-owner Whitbread was down 6.2% and mid-cap budget carrier easyJet down 7.8%.
As well as lockdown worries, compounding problems for the airline sector was a study from the US Centers for Disease Control & Prevention showing Covid-19 can spread on long-haul flights.
The study, released on Friday ahead of its final publication in November, tracked 217 passengers as they flew from London to Hanoi in March. The flight lasted around 10 hours and resulted in a cluster of 16 laboratory-confirmed Covid-19 cases.
"Among the 16 persons in whom SARS-CoV-2 infection was detected, 12 (75%) were passengers seated in business class along with the only symptomatic person (attack rate 62%). Seating proximity was strongly associated with increased infection risk," the study said.
Also hit by the prospect of tighter virus restrictions were pub shares. JD Wetherspoon was down 9.1% at midday, Marston's down 13%, and Mitchells & Butlers down 15%.
UK Health Secretary Matt Hancock did not rule out England's pubs being closed this coming weekend as government ministers prepare extra measures to curb the spread of coronavirus.
Hancock said on Monday that the UK government had not yet taken the "final decisions" on what response was necessary, but said the changes would be announced in the "very, very near future".
Jet engine maker Rolls-Royce fell 8.0% after confirming it is mulling the merits of a GBP2.5 billion equity raise.
The London-based company, in response to media reports, said: "We continue to review all funding options to enhance balance sheet resilience and strength. Amongst other options, we are evaluating the merits of raising equity of up to GBP2.5 billion, through a variety of structures including a rights issue and potentially other forms of equity issuance. Our review also includes new debt issuance."
The Financial Times, citing three people with direct knowledge of the matter, had reported on Sunday that Rolls-Royce was in talks with sovereign wealth funds, including Singapore's GIC, to raise GBP2.5 billion in October.
Network International was down 14% in the FTSE 250, though it said it was puzzled by the share price fall.
The Middle East-focused payment solutions provider it is "not aware" of the reason behind the movement in the company's stock price. The firm added that the trend of improving volumes in directly acquired domestic total processed volumes reported for July has continued in August and early September.
FirstGroup was down 13% and Go-Ahead Group down 8.1%. Rail franchising has been "ended" by extending measures introduced to keep trains running after the coronavirus outbreak, the UK Department for Transport announced Monday.
Operators have been moved to "transitional contracts" ahead of the creation of a "simpler and more effective structure" which will be developed over the coming months, the DfT said.
Rail firms will continue to be paid a management fee for running services, but under the ERMAs it will be a maximum of up to 1.5% of the franchise cost base, rather than 2% under the Emergency Measures Agreements introduced in March.
The DfT described the announcement as "the prelude" to a White Paper which will respond to the recommendations of Royal Mail PLC Chair Keith Williams, who was commissioned by the government to carry out a review of the railways.
Gold was quoted at USD1,931.70 an ounce midday Monday, down against USD1,953.70 on Friday. Brent oil was trading at USD42.27 a barrel, lower than USD43.34 late Friday.
By Lucy Heming; lucyheming@alliancenews.com
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