(Alliance News) - Stocks in London ended deeply in the red on Monday as the UK faces a triple threat of a new coronavirus strain, alongside trade disruptions and Brexit uncertainty as the year-end deadline draws closer.
Crisis talks are being held to prevent the UK being cut off from the continent over fears about the spread of the new coronavirus variant.
French transport minister Jean-Baptiste Djebarri said he hoped a protocol would be agreed by EU states "to ensure that movement from the UK can resume" after his country banned passengers and freight crossing the English Channel.
UK Prime Minister Boris Johnson was chairing a meeting of the Cobra emergency committee to discuss the mutant coronavirus and the travel restrictions imposed by the French and a string of other countries in Europe and beyond.
The closure of cross-channel routes until at least Wednesday has alarmed businesses in the lead-up to Christmas and with the added complication of the end of the Brexit transition period on December 31.
Major grocer J Sainsbury warned that disruption could hit supplies of lettuce, some salad leaves, cauliflowers, broccoli and citrus fruit, all of which are imported from the continent at this time of year. The stock closed down 2.7%. Tesco closed down 2.8% and WM Morrison Supermarkets ended 1.2% lower.
Djebarri said there would be a "solid health protocol" to "protect our nationals and our fellow citizens" while allowing movement to resume.
The developments come as Johnson effectively cancelled Christmas for almost 18 million people in London, south-eastern and eastern England as the region was put into a new two-week lockdown from Sunday. Under the new Tier 4 rules non-essential shops - as well as gyms, cinemas, casinos and hairdressers - have to stay shut and people are limited to meeting one other person from another household in an outdoor public space.
The FTSE 100 index closed down 112.86 points, or 1.7%, at 6,416.32. The FTSE 250 ended down 424.18 points, or 2.1%, at 19,692.11. The AIM All-Share closed down 5.33 points, or 0.5%, at 1,089.21.
The Cboe UK 100 ended down 1.6% at 638.59, the Cboe UK 250 closed down 2.1% at 17,250.83, and the Cboe Small Companies ended down 1.7% at 11,204.57.
In Paris the CAC 40 ended 2.4%, while the DAX 30 in Frankfurt ended 2.8% lower.
"The FTSE 100 and FTSE 250 have predictably suffered today, with the surge in a more contagious form of Covid leading to a swift global push to isolate the UK to avoid contagion. Understandably, the prospect of the UK being shut off from the world has come to the detriment of airlines, with IAG, easyJet, and Ryanair all hit hard in anticipation of a fresh wave of cancellations," said IG Group's Chris Beauchamp.
"The energy markets have also been hit hard, with the prospect of more protracted lockdowns denting confidence around 2021 demand. Ultimately of course this is the week before Christmas, and all through the markets, barely a creature is stirring. Volumes are dropping back and it is only natural to see such quick and dramatic reactions around today's headlines," Beauchamp added.
In the FTSE 100, stocks which had prospered during the height of the pandemic earlier this year ended in the green, amid virus fears and tighter restrictions.
Online grocer Ocado ended up 5.7%, online takeaway platform Just Eat Takeaway rose 1.9% and Dettol cleaning products maker Reckitt Benckiser closed up 1.2%.
At the other end of the large caps, travel and travel-related stocks finished in the red with British Airways parent International Consolidated Airlines closing down 8.0% and jet engine maker Rolls-Royce down 3.3%.
Midcap budget carrier easyJet closed down 7.2%, while rail ticket platform Trainline ended the worst FTSE 250 stock, down 11%. Irish airline Ryanair Holdings closed down 5.3%.
A raft of counties including Germany, Italy, Poland, Belgium, Austria, Bulgaria, Finland, Denmark, the Netherlands, Hungary and Switzerland said they will halt flights arriving from the UK. Germany said it was banning flights from the UK starting at midnight, Berlin time, on Sunday, with the German dpa news agency reporting it would remain in place until at least December 31.
France had banned all travel from the UK for 48 hours from midnight on Sunday.
Moreover, Canada Prime Minister Justin Trudeau said from midnight Sunday, Canada was putting a 72-hour stop on flights from the UK.
Royal Dutch Shell 'A' and 'B' shares closed down 5.0% and 5.7% respectively, after the oil major said it expects charges of up to USD4.5 billion due to impairments, asset restructuring and onerous contracts in the fourth quarter. Post-tax charges, in total, between USD3.5 billion to USD4.5 billion in relation to impairments, asset restructuring and onerous contracts are expected in the fourth quarter.
Brent oil was quoted at USD50.32 a barrel at the equities close, down sharply from USD52.16 at the close Friday, amid virus fears.
"Crude prices plummeted as a fast-spreading variant of the coronavirus emerging from the UK would cripple all travel across Europe and the US. The short-term crude demand outlook just got dealt a massive blow that will provide added uncertainty over the next couple of months," said Oanda Markets analyst Edward Moya.
The pound was quoted at USD1.3321 at the London equities close, down sharply from USD1.3482 at the close Friday on a triple whammy of virus, travel and Brexit fears. Sterling had hit multi-year highs against the greenback at the end of last week.
Johnson will not give in to demands to extend the Brexit transition period despite the coronavirus crisis, Downing Street said.
The UK leaves the single market and customs union on December 31 and will face tariffs and quotas on trade with the EU unless a deal is reached. But talks in Brussels remain difficult with "significant differences in key areas", including fishing rights and rules on maintaining fair competition.
Asked if there could be a "stand still" agreement to maintain current arrangements until a deal is in place, a spokesman for the PM said: "We have been clear on this point that we will either leave the transition period on December 31 with a free-trade agreement or we will leave with Australia-style WTO terms. That remains the case."
Trade has already been disrupted after France banned hauliers travelling from the UK due to fears over the spread of the more infectious strain of Covid-19.
But UK Transport Secretary Grant Shapps said firms already knew that change was coming after December 31 and had been told to plan for it.
Extending the transition period would "add fuel to the fire" by creating extra uncertainty, he suggested on BBC Breakfast.
Shapps said that measures, such as the use of the disused Manston airfield as a lorry park - which had been planned as a post-Brexit contingency - were now being used as a result of the coronavirus disruption.
Talks on a post-Brexit trade deal are expected to continue this week.
Analysts at ActivTrades commented: "Several countries in the EU and elsewhere imposed border restrictions to the circulation of freight and passengers from the UK, as concerns grow over a new strain of the coronavirus that appears to have originated in Britain and spreads at a faster rate. The scenario is worrying because this latest blow could exacerbate the social and economic impact of the ongoing pandemic in the country.
"Coupled with Brexit-related tensions - which remain on the wire after another deadline was missed on Sunday night - the new developments are increasing the pressure on the pound as investors' levels of anxiety over the future of the British economy once again are on the rise."
The euro stood at USD1.2217 at the European equities close, down from USD1.2235 late Friday. Against the yen, the dollar was trading at JPY103.50, up from JPY103.40 late Friday.
Stocks in New York were lower at the London equities close as fear over the new highly-infectious strain of Covid-19 in the UK offset optimism from agreement on a much-delayed US stimulus bill.
The DJIA was down 1.0%, the S&P 500 index down 1.8% and the Nasdaq Composite down 1.7%.
Over the weekend US lawmakers have reached a deal for a new package to boost the world's largest economy, which has been battered by the coronavirus pandemic.
"We've agreed to a package of nearly USD900 billion. It is packed with targeted policies to help struggling Americans who have already waited too long," Republican Senate leader Mitch McConnell in a statement.
Democratic House Speaker Nancy Pelosi and Senate minority leader Chuck Schumer confirmed an agreement had been reached with Republicans and the White House on a deal that "delivers urgently needed funds to save the lives and livelihoods of the American people as the virus accelerates."
The package is expected to include aid for vaccine distribution and logistics, extra jobless benefits of USD300 per week, and a new round of USD600 stimulus checks - half the amount provided in checks distributed last March under the CARES Act.
Gold was quoted at USD1,875.05 an ounce at the London equities close, lower against USD1,885.75 late Friday.
The economic events calendar on Tuesday has UK and US GDP figures at 0700 GMT and 1330 GMT respectively.
There are no events scheduled in the UK corporate calendar on Tuesday.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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