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UK stocks, pound tumble on fresh restrictions

UK stocks

The FTSE 100 fell 2%, briefly wiping £33bn off the index, while the FTSE 250 shed 1.7%

UK stocks and the pound sold off sharply on Monday morning, as investors reacted to fresh restrictions in Britain and news that much of Europe had shut its borders to the UK.

The pound dropped over 1% against the euro to €1.0904 in early trade and fell 1.6% against the dollar to $1.3297.

The FTSE 100 dropped as much as 2% in minutes when trade began on the London Stock Exchange, briefly wiping £33bn off the index. The FTSE 100 recovered some ground but remained down 1.4% shortly after the open. The more domestically focused FTSE 250 fell 1.7%.

The sell-off came in response to pandemic developments in the UK over the weekend.

Prime minister Boris Johnson held an emergency press conference on Saturday announcing the return of lockdown-like conditions for millions of people in London, the South East, and the East of England. The new Tier 4 restrictions were introduced to curb the rapid spread of a new variant of COVID-19, discovered last week. The prime minister said the new strain spreads up to 70% faster than the previous version of the virus.

On Sunday, multiple European countries closed their borders to Brits for fear of importing this new strain. This included France, which banned freight and people travelling from the UK. France’s ban will stand for an initial 48 hours.

France’s order shut down the Eurotunnel and much of the Port of Dover. The Port of Dover accounts for around a fifth of all trade with the EU, raising the prospect of shortages over Christmas.

This is a key supply route for fresh produce at this time of year: the channel crossings see 10,000 trucks passing daily during peak periods such as in the run up to Christmas, said Andrew Opie, director of food and sustainability at the British Retail Consortium.

Sky News reported that Johnson will hold emergency talks on Monday morning to try and avert food shortages.

Travel bans hit London-listed oil and airline stocks particularly hard. British Airways-owner IAG trailed the FTSE 100, falling 12%. EasyJet dropped 12.4% and Ryanair lost 5.6%.

BP and Shell both fell over 4%, while mid-market oil explorer Premier crashed over 12%.

European stock markets also dropped sharply on the pandemic developments. The CAC 40 dropped 2.1% in Paris and the DAX fell 1.9% in Frankfurt.

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