UK stocks and pound tumble as Europe shuts borders

Coronavirus - Mon Dec 21, 2020

UK stocks and the pound sold off sharply on Monday morning, as investors reacted to fresh pandemic restrictions in Britain and news that much of Europe had shut its borders to the UK.

Billions were wiped off the FTSE 100 on Monday morning after a new more infectious strain of COVID-19 sparked panic among investors. Stock markets fell sharply around the globe amid fears that the strain could spread internationally.

The FTSE 100 (^FTSE) dropped 2% in minutes when the London Stock Exchange opened, wiping £33bn off the index.

The sell-off deepened as trading continued. The bluechip index was down 3% by mid-morning. The more domestically-focused FTSE 250 (^FTMC) index fell 3.5%.

The FTSE 100 collapsed on Monday morning. Photo: Yahoo Finance UK

The pound was down 1.2% against the euro to €1.089 (GBPEUR=X) by mid-morning in London. Sterling fell 2% against the dollar to $1.3238 (GBPUSD=X).

Panic spread to other markets beyond the UK. European stock indexes dropped over 3% and Wall Street was poised for a heavy sell-off. The barrage of selling came in response to pandemic developments in the UK over the weekend.

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Travel restrictions imposed on UK
21 December 2020, Berlin: The information board at the capital's airport shows flights from London-Gatwick and Manchester as "cancelled". Following the emergence of a new variant of the coronavirus, numerous countries are suspending flights from the UK for the time being - including Germany. Photo: Paul Zinken/dpa (Photo by Paul Zinken/picture alliance via Getty Images)
Freight lorries and goods vehicles are pictured parked in a paring lot near the Port of Dover in in Dover, Kent, on the south east coast of England on December 21, 2020, as a string of countries banned travellers all but unaccompanied freight arriving from the UK, due to the rapid spread of a more-infectious new coronavirus strain. - Britain's critical south coast port at Dover said on Sunday it was closing to all accompanied freight and passengers due to the French border restrictions "until further notice". (Photo by Adrian DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)
Freight lorries at organised into stacks on the M20 motorway which leads to the Port of Dover at Mersham in Kent, south east England on December 21, 2020, as a string of countries banned travel including accompanied freight arriving from the UK, due to the rapid spread of a more-infectious new coronavirus strain. - Britain's critical south coast port at Dover said on Sunday it was closing to all accompanied freight and passengers due to the French border restrictions "until further notice". (Photo by Adrian DENNIS / AFP) (Photo by ADRIAN DENNIS/AFP via Getty Images)
People queue for a shuttle train at Gatwick Airport in West Sussex, amid concerns that borders will close and with the public being urged to adhere to Government guidance after Prime Minister Boris Johnson announced on Saturday that from Sunday areas in the South East currently in Tier 3 will be moved into a new Tier 4 for two weeks Ð effectively returning to the lockdown rules of November, after scientists warned of the rapid spread of the new variant coronavirus. (Photo by Gareth Fuller/PA Images via Getty Images)
Passengers at Gatwick Airport in West Sussex, amid concerns that borders will close and with the public being urged to adhere to Government guidance after Prime Minister Boris Johnson announced on Saturday that from Sunday areas in the South East currently in Tier 3 will be moved into a new Tier 4 for two weeks Ð effectively returning to the lockdown rules of November, after scientists warned of the rapid spread of the new variant coronavirus. (Photo by Gareth Fuller/PA Images via Getty Images)
LONDON, UNITED KONGDOM - DECEMBER 20: Passengers arrive at St Pancras International train station in London, United Kingdom on December 20, 2020 as several European countries ban travel to and from the UK due to fears over the emergence of a new variant of coronavirus. Large parts of south-east England, including London, are now under a new, stricter level of restrictions to curb the spread of the virus during the upcoming holiday season. (Photo by Hasan Esen/Anadolu Agency via Getty Images)
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
Empty ramps and lanes at the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
The White Cliffs are reflected in the windscreen of a lorry whilst the driver sits his cab and queues to enter the port of Dover in Kent as the UK marked less than two weeks until 2021 and the end of the Brexit transition period. (Photo by Gareth Fuller/PA Images via Getty Images)
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
Ramps and lanes are empty at the Port of Dover in Kent, England which has been closed after the French government's announcement Monday, Dec. 21, 2020. France banned all travel from the UK for 48 hours from midnight Sunday, including trucks carrying freight through the tunnel under the English Channel or from the port of Dover on England's south coast. (Steve Parsons/PA via AP)
LONDON, UNITED KONGDOM - DECEMBER 20: Police officers patrol at St Pancras International train station in London, United Kingdom on December 20, 2020. several European countries ban travel to and from the UK due to fears over the emergence of a new variant of coronavirus. Large parts of south-east England, including London, are now under a new, stricter level of restrictions to curb the spread of the virus during the upcoming holiday season. (Photo by Hasan Esen/Anadolu Agency via Getty Images)
Passengers at Gatwick Airport in West Sussex, amid concerns that borders will close and with the public being urged to adhere to Government guidance after Prime Minister Boris Johnson announced on Saturday that from Sunday areas in the South East currently in Tier 3 will be moved into a new Tier 4 for two weeks Ð effectively returning to the lockdown rules of November, after scientists warned of the rapid spread of the new variant coronavirus. (Photo by Gareth Fuller/PA Images via Getty Images)
21 December 2020, Lower Saxony, Langenhagen: Emergency vehicles of the rescue service stand on the grounds of Hannover-Langenhagen Airport. Due to the new variant of the coronavirus, the Federal Ministry of the Interior has instructed the Federal Police to systematically check travellers from Great Britain and South Africa with immediate effect. Photo: Moritz Frankenberg/dpa (Photo by Moritz Frankenberg/picture alliance via Getty Images)
21 December 2020, Lower Saxony, Langenhagen: Emergency personnel stand by and in an airport fire brigade bus on the grounds of Hannover-Langenhagen Airport. Due to the new variant of the coronavirus, the Federal Ministry of the Interior has instructed the Federal Police to systematically check travellers from Great Britain and South Africa with immediate effect. Photo: Moritz Frankenberg/dpa (Photo by Moritz Frankenberg/picture alliance via Getty Images)
ISTANBUL, TURKEY - DECEMBER 21: Passengers arrive at Istanbul airport as Turkey began testing passengers arriving from the UK early Monday for a new variant of the coronavirus after health officials in Britain confirmed it was rapidly spreading in the country on December 21, 2020 in Istanbul, Turkey. All passengers contact details were taken and they are required to self-isolate.Turkey joined other European countries late Sunday in banning flights from the UK and other countries due to concerns over the new fast-moving coronavirus strain. (Photo by Abidin Mutlu Bozdag/Anadolu Agency via Getty Images)
ISTANBUL, TURKEY - DECEMBER 21: Passengers arrive at Istanbul airport as Turkey began testing passengers arriving from the UK early Monday for a new variant of the coronavirus after health officials in Britain confirmed it was rapidly spreading in the country on December 21, 2020 in Istanbul, Turkey. All passengers contact details were taken and they are required to self-isolate.Turkey joined other European countries late Sunday in banning flights from the UK and other countries due to concerns over the new fast-moving coronavirus strain. (Photo by Abidin Mutlu Bozdag/Anadolu Agency via Getty Images)
Empty check-in lanes at the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
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Prime minister Boris Johnson held an emergency press conference on Saturday announcing the return of lockdown-like conditions for millions of people in London, the South East, and the East of England. The new Tier 4 restrictions were introduced to curb the rapid spread of a new variant of COVID-19, discovered last week. The prime minister said the new strain spreads up to 70% faster than the previous version of the virus.

On Sunday, multiple European countries closed their borders to Brits for fear of importing this new strain. This included France, which banned freight and people travelling from the UK. France's ban will stand for an initial 48 hours.

READ MORE: UK economy in crisis as countries ban flights and freight from UK

France's order shut down the Eurotunnel and much of the Port of Dover. The Port of Dover accounts for around a fifth of all trade with the EU, raising the prospect of shortages over Christmas.

"This is a key supply route for fresh produce at this time of year: the channel crossings see 10,000 trucks passing daily during peak periods such as in the run up to Christmas," said Andrew Opie, director of food and sustainability at the British Retail Consortium.

Sky News reported that Johnson will hold emergency talks on Monday morning to try and avert food shortages.

Travel bans hit London-listed oil and airline stocks particularly hard. British Airways-owner IAG (IAG.L) trailed the FTSE 100, falling 12%. EasyJet (EZJ.L) dropped 11% and Ryanair (RYA.L) lost 6.7%.

BP (BP.L) and Shell (RBSB.L) both fell 7%, while mid-market oil explorer Premier (PMO.L) crashed over 13%. The price of oil (BZ=F) fell over 5%.

READ MORE:Travel and transport stocks nosedive as countries ban flights from UK

On the continent, the CAC 40 (^FCHI) stock index fell 3.7% in Paris and the DAX (^GDAXI) lost 3.9% in Frankfurt.

US stock futures were sharply lower, despite lawmakers agreeing a new stimulus package after months of delays. The new package, worth $900bn, will see Americans receive $600 cheques from the government.

S&P 500 futures (ES=F) were down 2.5%, Dow Jones futures (YM=F) fell 2.3%, and Nasdaq futures (NQ=F) dropped 1.5%.

Naeem Aslam, chief market analyst at Avatrade, said investors around the world were concerned about the new strain of COVID-19 discovered in the UK.

"Investors are paying more attention to the short-term deterioration in the coronavirus situation and forgetting that we have a coronavirus vaccine, which will have much positive influence on the upcoming quarter's economic data," he said.

Investors piled into bonds as they dumped stocks. Yields on UK gilts — government bonds — fell to record lows on Monday. (Yields move inversely to price, meaning low yields translate to high demand and high prices). Government bonds are traditionally seen as "safe haven" assets and are in high demand at times of crisis.

The Japanese yen, another safe haven asset, rose 0.5% against the dollar (JPY=X).

Markets were mixed in Asia overnight. Japan's Nikkei (^N225) fell 0.2% and the Hong Kong Hang Seng (^HSI) dropped 0.7%. On mainland China, the Shanghai Composite (000001.SS) rose 0.7% and the Shenzen Component (399001.SZ) rallied 2%.

- This article first appeared on Yahoo

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