Nearly £ 2 billion was wiped from the value of UK airlines and travel-related businesses on Friday, with Austria’s decision to order a nationwide lockdown fueling fears of the introduction of new pandemic restrictions on across Europe.
Austria will enter its third national lockdown from Monday, which could last until December 12, in a bid to stop an increase in coronavirus cases and an increase in deaths.
The potential for introducing restrictive measures in other European countries – there is a similar resurgence of Covid in Germany – has led to a sharp sell-off of UK listed companies in the travel sector.
IAG, owner of British Airways, fell 3.8%, wiping almost £ 300million from the company’s market capitalization. IAG, which also owns airline Iberia, fell to its lowest level in two months as investors wiped out gains from the resumption of transatlantic travel to the United States last week.
Rolls-Royce, down nearly 4%, is the biggest drop in the FTSE 100, with Premier Inn owner Whitbread, which also operates in Germany, and the Intercontinental Hotels group also falling.
The blue chip index fell to its lowest level in three weeks, closing 32 points at 7223.
“The number of cases on the rise [in Austria] are well past last year’s peak, ”said Craig Erlam, senior market analyst at trading firm Oanda. “While the deaths remain well below the peak, they are accelerating and the government is clearly keen to stop them before the situation potentially escalates. With Germany experiencing a similar trend, the question now is whether the region’s largest economy will follow the same path.
Companies hit by negative investor sentiment on Friday also included airlines easyJet, Ryanair, Lufthansa and Wizz Air, as well as package travel company Tui and cruise line Carnival.
Shares of SSP, which runs Caffè Ritazza and Upper Crust chains in transportation hubs, and Restaurant Group, which runs chains such as Wagamama and Frankie & Benny’s, have also been affected. National Express and WH Smith, which operates at airports and train stations, also suffered price cuts.
Jens Spahn, Germany’s Health Minister, said on Friday the country was “facing a national emergency” and did not rule out a similar national lockdown. “We are in a situation where we cannot rule anything out,” he said.
On Thursday, the head of the German disease control agency said the country was headed for a “very bad Christmas” if drastic measures were not taken to curb the spread of the coronavirus.
Erlam said: “The situation is not as bad in other countries like France, Italy and Spain, but that could change in the coming weeks, as we have seen roughly in the same time last year. High vaccination rates mean that the link between the number of cases and deaths is much weaker, but the former is increasing at a remarkable rate, which clearly makes it very difficult to ignore. “
Oil also fell sharply, fearing winter demand for energy could be hit by further shutdowns. Brent crude fell more than 3.5% to $ 78.31 a barrel, the lowest since Oct. 1 and nearly 10% below three-year highs last month.
Some economists have warned that the United States could be vulnerable to a new wave of infections this winter. Less than 60% of the nation is vaccinated, less than some European countries.
“Colder weather has already triggered a sharp resurgence in infection rates in Europe and, with vaccination rates in the United States generally lower, there is a risk of a seasonal increase in the Midwest and Northeast.” said Paul Ashworth, chief economist for North America at Capital Economics.
Energy stocks, banks and industrials fell on Wall Street, while a rally in tech companies – which are less vulnerable to lockdowns – pushed the Nasdaq Composite to a new high.