Almost £2bn was wiped off the value of UK airlines and travel-related companies on Friday as Austria’s decision to order a national lockdown stoked fears of the introduction of new pandemic restrictions across Europe.
Austria will go into its third national lockdown from Monday, which could last until 12 December, in an attempt to arrest a surge in coronavirus cases and rising deaths.
The potential for restrictive measures to be introduced in other European countries – there is a similar Covid resurgence in Germany – led to a sharp sell off UK-listed companies in the travel sector.
IAG, the owner of British Airways, fell 3.8%, wiping almost £300m off the company’s market capitalisation. IAG, which also owns the airline Iberia, fell to a two-month low as investors washed out the gains seen when transatlantic travel to the US resumed last week.
The biggest fallers on the FTSE 100 included Rolls-Royce, down almost 4%, along with the Premier Inn owner, Whitbread, which also operates in Germany, Intercontinental Hotels group and the events business Informa.
The blue-chip index fell to its lowest level in three weeks, closing down 32 points at 7223.
“Surging case numbers [in Austria] have far surpassed last year’s peak,” said Craig Erlam, a senior market analyst at the trading company Oanda. “While fatalities remain well below the peak, they are accelerating and the government is clearly keen to arrest it before the situation potentially becomes much worse. With Germany seeing a similar trend, the question now becomes whether the region’s largest economy will follow the same path.”
Businesses affected by negative investor sentiment on Friday also included the airlines easyJet, Ryanair, Lufthansa and Wizz Air, as well as the package holiday firm Tui and cruise operator Carnival.
Shares in SSP, which runs the Caffè Ritazza and Upper Crust chains at transport hubs, and Restaurant Group, which runs chains including Wagamama and Frankie & Benny’s, also took a hit. National Express and WH Smith, which operates in airports and train stations, also suffered share price falls.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
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’re in a situation where we can’t rule anything out,” he said.
On Thursday, the head of Germany’s disease control agency said that the country was heading for a “very bad Christmas” if drastic measures were not taken to curb the spread of the coronavirus.
Erlam said: “The situation is not quite so severe in other countries like France, Italy and Spain but that could change in the coming weeks, as we saw around the same time last year. High vaccination rates mean the link between case numbers and fatalities is far lower but the former is rising at a remarkable rate, which is clearly making it very hard to ignore.”
Oil also fell heavily, on worries that winter demand for energy would be hit by new lockdowns. Brent crude tumbled over 3.5% to $78.31 per barrel, the lowest since 1st October and nearly 10% below last month’s three-year highs.
Some economists warned that America could be vulnerable to a new wave of infections this winter. Less than 60% of the nation is vaccinated, lower than some European nations.
“The colder weather has already triggered a big resurgence in infection rates in Europe and, with US vaccination rates generally lower, there is a risk of a seasonal surge in the midwest and north-east,” said Paul Ashworth, chief North America economist at Capital Economics.
Energy stocks, banks and industrial stocks fell on Wall Street, while a rally into tech companies – who are less vulnerable to lockdowns – pushed the Nasdaq Composite to a new record high.