Global equity markets slump on concerns about Covid-19 surge

UK’s FTSE 100 plunged on Monday, tracking a drop in global equity markets as investors worried about a surge in Covid-19 cases due to the Omicron variant in Europe and the United States.

The blue-chip FTSE 100 index declined 1.8 per cent to hit a two-week low in early deals.

Oil majors BP and Royal Dutch Shell fell nearly 2.5 per cent each after crude prices dropped $2 a barrel, while industrial metal miners lost 2.5 per cent due to weakness in copper prices.

The domestically focussed mid-cap index fell 2.1 per cent, with the travel and leisure sector leading the declines with a 3.2 per cent drop.

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The UK government’s chief scientific adviser Patrick Vallance told ministers at the weekend that new Covid-19 restrictions should be introduced as soon as possible to stop the NHS being overwhelmed, according to a media report.

Britain’s deputy prime minister said twelve people have died from the Omicron variant in the UK, and 104 are currently in hospital with it.

Standard Chartered fell 1.9 per cent after the Bank of England fined it £46.55 million for misreporting its liquidity position to the regulator and for failings in its controls.

Europe’s Stoxx 600 Index dropped more than 2 per cent, while US futures slid at least 1 per cent and MSCI’s gauge of Asia-Pacific equities was set for its worst drop since March. Treasuries led global bonds gains and the dollar held a jump from Friday.

Fresh restrictions in parts of Europe to stem the rapid spread of omicron are rattling investors. Rising cases led the Netherlands to return to lockdown, while UK health secretary Sajid Javid refused to rule out stronger measures before Christmas.

US lockdowns likely won’t be necessary but hospitals may be strained, Biden’s top medical adviser Anthony Fauci said.

Separately, Goldman Sachs Group economists reduced their US economic growth forecasts after senator Joe Manchin blindsided the White House on Sunday by rejecting Biden’s roughly $2 trillion tax-and-spending package, leaving Democrats with few options for reviving it.

Crude oil slid on worries that mobility curbs to tackle the strain will hurt demand. Commodity-linked currencies struggled, while the lira tumbled to another record low after Turkish president Recep Tayyip Erdogan pledged to continue cutting interest rates.

Markets are grappling with a range of uncertainties while heading toward a holiday period when thinner trading volumes can exacerbate swings.

“Omicron remains a concern and cases are on the rise,” said Robert Schein, chief investment officer at Blanke Schein Wealth Management.

“Investors should be prepared for Covid to continue to be a main factor in market performance heading into 2022. After the bull run we’ve seen over the past 21 months, investors aren’t as used to prolonged periods of volatility.”

Global stocks retreated last week in part on an outlook of diminishing central bank stimulus as officials pivot toward fighting inflation.

Federal Reserve governor Christopher Waller said a faster wind-down of the central bank’s bond-buying program puts it in a position to start lifting interest rates as early as March.

In China, banks lowered the one-year loan prime rate, a key benchmark of borrowing costs, for the first time in 20 months. But that did little to shore up risk appetite. – Agencies