stockmarket

FTSE 100 falls sharply amid fears for travel due to India Covid variant


The FTSE 100 fell sharply on Tuesday, taking it back below 7,000, as global markets were dragged lower by growing investor concern over the Indian variant of Covid-19 and sliding tobacco shares.

The blue-chip index dropped by 2% or 140 points to close the day at 6,860, led by the British Airways owner, IAG, amid fears over renewed travel restrictions and as shares in major tobacco firms fell on the prospect of tougher rules being introduced by the Biden administration.

It was the worst day for the FTSE – which had risen above the 7,000 mark on Friday for the first time since the pandemic – in two months.

Shares in IAG fell more than 8%, while the jet-engine manufacturer Rolls-Royce fell by almost 6%. Wizz Air, FirstGroup and the cruise operator Carnival were among the biggest fallers on the FTSE 250, reflecting renewed investor fears about prospects for travel.

Joshua Mahony, a senior market analyst at the financial trading platform IG, said: “European markets have been hit hard today, with rising global coronavirus cases serving as a timely reminder that the pandemic is far from over despite recent vaccination progress.”

France’s Cac 40 index closed down 2.1% while Germany’s Dax fell 1.5%. The Europe-wide Stoxx 600 fell 1.9%, its biggest one-day loss since December. In the US, the Dow Jones industrial average was down by about 0.9% by late morning in New York.

The losses on the stock market come after the UK put India on the “red list” for flights in response to rising coronavirus cases fuelled by the emergence of a new variant of the disease, while there is also concern about rising cases across Asia, including in Japan.

On a day of selling pressure on the financial markets, about £6bn was wiped off the value of the UK’s two big tobacco companies amid reports the White House could force manufacturers to cut the nicotine content in cigarettes.

The FTSE 100 companies British American Tobacco and Imperial Brands both fell by more than 7% as investors sold-off shares fearing the changes would undercut long-term sales prospects.

In Asia, Japan Tobacco fell by almost 2% while the US conglomerate Altria, which owns brands including Marlboro and Benson & Hedges, fell more than 6% on Wall Street.

The Biden administration is considering forcing tobacco companies to lower the nicotine in all cigarettes sold in the US to levels at which they are no longer addictive, according to a report in the Wall Street Journal.

Walid Koudmani, a market analyst at the online trading platform XTB, said: “Despite the fact that rumours of this regulation have been around for years, and while some may downplay the effectiveness of the ban, it is clear that more governments are moving in this direction and that it is becoming a real possibility in the short term.”

New Zealand announced plans last week that could lead to a ban on smoking for anyone born after 2004, as part of a suite of proposals moving the country closer to its goal of being smoke-free by 2025.

Some e-cigarette flavours such as fruit and mint were banned in the US under the Trump administration last January, with American regulators warning “epidemic levels of youth use of e-cigarettes” risked becoming a gateway to nicotine addiction.

“Nevertheless, any regulatory change could take years to fully implement and this could buy tobacco firms much needed time to adapt to the change or lobby the US government to change track,” Koudmani added.



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