COVID-19 pandemic gloom was swamping markets on Friday, with London’s smaller companies bearing the brunt of the damage as investors envisaged longer lockdowns and a bleak travel situation.
The FTSE 250 index
dropped 0.8%, matching losses across larger continental bourses, while the FTSE 100
wasn’t far behind with a 0.6% loss. Both indexes are set to drop more than 1% for the week.
“Weaker services PMI [purchasing managers index] readings and the prospect of a total U.K. travel ban have seen the leisure and travel sectors hit, as the outlook for the global economy continues to darken,” said Chris Beauchamp, chief market analyst at IG, in a note to clients.
A preliminary “flash” IHS Markit/CIPS U.K. Composite Purchasing Managers’ Index careened lower to 40.6 in January, down from 50.4 in December.
When asked whether the current lockdown may need to be extended into the summer, Prime Minister Boris Johnson didn’t rule that out, as the country deals with a new, more infectious variant of the coronavirus that causes COVID-19. He added that it was “unquestionably going to be a tough few weeks ahead.”
The government added a couple more countries to its list of banned visitors — Tanzania and Democratic Republic of Congo — while Portugal has suspended all flights to and from the U.K. The European Union advised against travel between countries at a meeting on Thursday, but stopped short of closing borders.
Airlines were only seeing the gloom on Friday, with International Consolidated Airlines down 3% on the FTSE 100, and shares of easyJet
and Wizz Air
down 3% and 4%, respectively, on the smaller index. Shares of Trainline
which books rail and coach travel, dropped 4.8%.
German-U.K. travel and tourism operator TUI
saw the biggest plunge, with shares dropping 15%.
On the upside, shares of Kainos Group
soared 18% on the FTSE 250, after the software company posted a positive trading update. The company said continued business momentum has driven strong trading and it expects year-end March 2021 results to come in ahead of forecasts.