UK assets under pressure on concerns over a new modified Covid-19 strain

Vrasidas Neofytou
Head of Investment Research

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The UK assets opened the week with significant losses on concerns over a fast-spreading coronavirus strain in the country and little progress on a post-Brexit trade deal. 

The FTSE 100 Index tumbled as much as 3% on Monday as UK travel, airline, and retail shares were among the worst hit. Pound Sterling lost more than 2% against major currencies, the biggest drop since October, as investors moved to more safe-haven currencies.

The new variant that emerged in southeast England in September, is causing concerns as it is reported to be as 70% more transmissible than other strains and may be contributing to a spike in cases in the country, However, health experts said that Pfizer’s and Moderna’s vaccines would likely be effective against the new variant.

Prime Minister Boris Johnson announced emergency lockdowns in London and other regions over Christmas to curb the spread of the new strain, while several countries banned flights and suspended rail links with the UK.

The uncertainty about the new variant, together with the resumed lockdowns and travel bans have dampened the mood for UK economic prospects, as there is a growing fear that the virus situation will remain on course at least through Q1 2021.

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