What’s happening: British stocks fell sharply on Monday as the country announced stricter restrictions in order to contain the spread of the new strain of the coronavirus detected.
What happened: UK’s blue-chip stocks tumbled to around three-week lows in yesterday’s session with various countries announcing a ban on travel to and from Britain.
The new variant of the virus, which is suspected of being around 70% more transmissible than the original covid-19 virus strain, could also add more complications to the Brexit trade talks.
Why it matters: The UK was the first country to begin mass vaccination after approving the vaccine developed by Pfizer and its German partner BioNTech on December 8. Investors cheered the news against the backdrop of the rapid spread of infections and a high death toll of 3.3% in the UK.
The good news was tarnished, however, by reports of allergic reactions to the vaccine. To make matters worse, the UK detected a new strain of the covid-19 virus. British Health Secretary Matt Hancock said that the new virus variant is "out of control," which could lead to a spike in new cases in a country that was already witnessing record infections.
This led to increased restrictions in London and southeast England during the festive Christmas season. Various countries around the world announced restrictions on travel from the UK, with France, Italy, Germany, Canada, India, and Israel banning flights from the country.
This situation is likely to have an impact on the ongoing Brexit talks, with the UK and EU still in a deadlock over some key issues, including fisheries and fair competition, even as the December 31 deadline is fast approaching.
London’s FTSE 100 tumbled more than 2% at the start of the session, wiping out around £33 billion from the value of the index. The sell-off only deepened during the session, although the index recovered some losses after French transport minister announced plans to consider restarting goods trade with the UK.
The FTSE 100 settled lower by 1.73% on Monday, while the FTSE 250 fell 2%, with oil and airline stocks among the hardest hit due to the travel bans.
What to watch: Investors await a basket of economic reports from the UK, including current account, GDP growth rate, business investment and public sector net borrowing. The current account gap is expected to widen massively to £11.6 billion in the third quarter, from £2.8 billion in the second quarter. Britain's GDP is projected to contract by 9.6% in the third quarter.
Markets will also keep a close eye on the spread of the new virus variant in the country. Brexit talks will remain in focus, as the end of the transition period is fast approaching