Tide of fear engulfs FTSE on Red Friday: But investors should stay calm amid panic over new coronavirus variant, say experts
- Travel stocks hammered as fears about Covid variant wiped £72bn off FTSE 100
- British Airways-owner IAG was the worst hit in a day traders dubbed ‘Red Friday’
- Airlines and holiday firms were left smarting as investors ditched stock
Travel stocks were hammered as fears about a new Covid variant wiped £72billion off the FTSE 100 and rocked global markets.
British Airways-owner IAG was the worst hit in a brutal day traders dubbed ‘Red Friday’ after the Omicron strain of the virus was identified in South Africa and Belgium.
Companies in many industries lost ground – but airlines and holiday firms were left smarting as investors worried that widespread travel restrictions could come into force and kibosh their nascent recovery.
The UK and EU have already moved to introduce restrictions for travellers coming from South Africa, Botswana and several other African countries.
The Footsie fell by 3.6 per cent in the index’s worst day since June 2020, as traders also fretted that in a worst-case scenario the UK could be plunged into a winter lockdown. The blue-chip index closed down 3.6 per cent, or 266.34 points, at 7044.03, mirroring similar falls in European indexes, while the FTSE 250 dropped 3.2 per cent, or 742.07 points, to 22537.89. Oil prices also plunged 11 per cent to around $74 a barrel. But despite the panic on the market, analysts urged retail shareholders to hold firm and avoid selling off any of their investments based on Friday’s plunge.
Russ Mould, investment director at AJ Bell, said: ‘Selling when things look at their blackest is not the right thing to do.’
Michael Hewson, chief market analyst at CMC Markets UK, said: ‘You invest for the long term, not on one-day moves.’ Wall Street indexes the Dow Jones and S&P also fell into the red last night, though Hewson added that these moves could have been exaggerated by the fact that the US only had a half day of trading following Thanksgiving on Thursday.
This means that fewer shares overall were traded yesterday and may not be a fully accurate picture of the stock market.
On the London Stock Exchange, which had a normal day of trading, IAG sank by 14.9 per cent, while Easyjet tumbled 11.5 per cent and holiday group Tui by 10.5 per cent. Stocks related to the travel industry also made steep losses with Upper Crust-owner SSP plunging 15.7 per cent and WH Smith, which makes a large chunk of its money from train station and airport branches, fell 14.3 per cent.
Heavy industry groups that work in the aerospace industry were also down. Melrose dropped 10.3 per cent, while engine-maker Rolls-Royce fell 11.6 per cent.
Joshua Mahony, senior market analyst at IG, said: ‘Understandably, travel stocks have been at the forefront of this sell-off. However, market losses have been widespread, with the prospect of future restrictions bringing caution for most of the so-called reopening stocks.’
Novacyt shares buck the trend
One company bucking the trend was Novacyt.
The clinical diagnostics company’s shares soared after it said a real-time Covid test crucial to its performance was approved by the Government.
The stock shot up 31 per cent, or 102.9p, to 434.9p. New rules for tests meant Novacyt had to stop selling its Genesig PCR test in the UK this month.
It was one of the first commercially available for Covid-19 tests and Novacyt said that it detected all known variants and mutations of Covid-19.
It had to apply to the UK Health Security Agency to be added to a register of approved tests. Novacyt warned this month if none of its products were added to the UK Health Security Agency’s register its full-year revenues would be hit by around £3m. The approval means the financial impact will be ‘significantly lower’ as the Genesig PCR test will make up about 30 per cent of that.
Novacyt is dual-listed in Paris, where its headquarters are based, but it mostly operates from Britain where it has a head office and manufacturing site in Surrey.