The sell-off is gathering pace.
The FTSE 100 is now down 104.57 points or 1.47% at 7005.38.
Intercontinental Hotels Group PLC (LSE:IHG) is down 2.83% on concerns the new COVID-19 strain could hit its business if travel dries up again.
Lloyds Banking Group PLC (LSE:LLOY) has lost 2.76% on talk that another bump on the road to recovery could mean a delay in the nterest rate rises which would benefit its business.
BT Group PLC (LSE:BT.A), which was this week boosted by speculation of a possible takeover by India’s Reliance Industries, is now down 2.54%.
Analysts at UBS said: “While we cannot rule out an approach by Reliance Industries… we think National Security law and the pension deficit could be notable barriers to M&A.
“The news follows prior reports that Reliance Industries was looking at T-Mobile NL earlier in the year that was ultimately acquired by private equity and it is not clear if Reliance Industries formally entered the bidding process.
“Should Reliance Industries bid for BT, we think this could be negative for both the UK market and the broader European Telecoms sector. However, it is not clear to us whether such a move would fit within the financial and strategic framework for Reliance Industries. The prospect of an operator with a successful track record of being disruptive potentially entering the UK market could lead to concerns about rising competition. In addition, there may be concerns on the scale of Reliance Industries ambitions for Europe as a whole.”
France’s Altice is also hovering around BT with a 12.1% stake, and a moratorium on it bidding expires on 10 December.
8.31am: AstraZeneca hit by Omicron worries
AstraZeneca PLC (LSE:AZN) is among the biggest fallers so far.
Its shares are down 2.35% on the concerns that current vaccines may not be as effective against Omicron.
This has outweighed news that its new drug application for Lynparza has been granted priority review in the US for treatment of breast cancer.
8.25am: Airlines buck downward trend
Leading shares have dropped sharply on growing concerns about the Omicron variant, thanks to the comments from Moderna boss Stephane Bancel casting doubts of the effectiveness of existing vaccines on the new strain.
The FTSE 100 has fallen 72.43 points or 1.02% to 7037.52, wiping out all of Monday’s gains as the market’s rollercoaster ride since the end of last week continues.
Brent crude has dropped 2.66% to an eleven week low of US$71.49 a barrel on fears the new variant could derail the global economic recovery.
So BP PLC (LSE:BP.) is down 1.43% while Royal Dutch Shell PLC (A shares) (LSE:RDSA) has lost 1.09%.
But airlines strangely are bucking the trend despite worries about further restrictions on travel.
easyJet plc (LSE:EZJ) has added 0.99% after it reported slightly better than expected full year losses of GBP1.14bn.
British Airways owner International Consolidated Airlines Group (LSE:IAG) is up 0.69%.
But Richard Hunter, head of markets at interactive investor, said: “Caught in the eye of the storm as the latest variant derails a tentative recovery, the outlook for airlines has been thrown into doubt once more.
“While the extent and impact of Omicron are not yet fully understood, the reaction from governments in restricting travel is becoming the norm. This begs the questions of how future variants and mutations are dealt with by the authorities, and whether the airlines can even hope to prosper given the stop-start nature of the present recovery.
“In addition, the propensity of consumers to travel is under renewed pressure, as some will decide on the safe option of not travelling at all. At the same time, cash burn for airlines remains and with even part of the fleet standing idle there is little room for manoeuvre in raising revenues to combat the costs incurred to date.”
6.50am: Market revival set to be cut short
The FTSE 100 will fall out of bed on Tuesday and wipe out the previous day’s dead-cat bounce, as financial markets begin what is likely to be an especially volatile few weeks of omicron-related whipsawing.
London’s blue-chip index will plummet almost 90 points, spread betters in the City predict, following a rebound of 66 points at the start of the week after the 266-point cratering at the end of the past one.
Overnight, Wall Street’s big three equity indices advanced, but Asian markets are all bathed in red this morning.
“Concerns over the Omicron variant appear to be hitting sentiment in Europe more than in the US, which isn’t altogether surprising when you consider that the continent is already struggling to get on top of a sharp rise in Delta cases, even without the problems of dealing with a new variant,” said Michael Hewson at CMC Markets.
After the slight bounce yesterday, he said the cautious positivity has quickly given way to pessimism after comments from the chief executive of Moderna, Stephane Bancel, that existing vaccines face a “material drop” in effectiveness against the omicron variant.
It is likely to take months for pharmaceutical companies to manufacture enough jabs at a sufficient scale to make a difference, he told the FT, due to the high number of omicron mutations.
Markets are on track for a very “choppy” December, driven by omicron headlines, said Jeffrey Halley at Oanda, with the big data releases this week “rendered irrelevant” as it is backwards-looking.
“All that will matter is whether more restrictions are coming back around the world, and whether central banks, especially the Fed, hit the pause button on monetary tightening plans. I already know the answer to that one,” he said.
“The big winner this month will be volatility, we should see plenty of it.
“But with markets selling everything on negative omicron headlines and clasping at the most tenuous of straws to buy everything back on any perceived positive headlines, investors looking for thematic direction moves this month, are likely to be sorely disappointed.”
6.50am: Early Markets – Asia / Australia
Asia-Pacific shares gave up their early gains following a statement from Moderna CEO Stephane Bancel that he expects existing vaccines to be less effective against the new COVID-19 variant.
China’s Shanghai Composite slipped 0.10% while Hong Kong’s Hang Seng index slumped 2.37%.
The Nikkei in Japan declined 1.45% and South Korea’s Kospi dipped 2.08%.
Australia’s S&P/ASX200 closed 0.22% higher at 7256 points as major indices on Wall Street rose overnight after U.S. President Joe Biden said there’s no need for Covid omicron lockdowns for now.
