Global markets sink on resurgent virus fears

The spreading Delta virus variant fuelled fears it could undermine economic recovery.

Wall Street sign near the New York Stock Exchange building in New York. Picture: AFP.

LONDON - World stocks sank on Monday as the spreading Delta virus variant fuelled fears it could undermine the economic recovery, while oil prices tanked after leading producers finally agreed to hike output.

Oil prices plunged after the OPEC+ alliance agreed Sunday to pump an extra 400,000 barrels per day a month from August to meet rising demand as economies reopen.

London stocks gave up 2.6% in afternoon deals meanwhile after the UK government lifted England's daily pandemic curbs despite soaring infection rates.

In eurozone trade, Frankfurt slumped by 2.9% and Paris shed 3.0%, and in New York the Dow Jones index was off by 2.1% in morning exchanges.

Europe mirrored sharp losses in Asia as investors dumped risky investments and fretted that runaway inflation could spark interest rate hikes.

'COVID KNOCKS CONFIDENCE'

"Risk aversion has remained the dominant theme," noted Fawad Razaqzada, an analyst at ThinkMarkets.

"The sell-off has been quite brutal for stocks, but it is difficult to say whether this is just a retracement ahead of more gains at some later point in time or whether this is the start of something really major," he added.

In England meanwhile, almost all COVID-19 restrictions were lifted on Monday, a move criticised by many health experts - but hailed by media and supporters as "freedom day".

"Far from bringing an added dose of confidence to investors, 'Freedom Day' appears to be a setback," Hargreaves Lansdown analyst Susannah Streeter told AFP.

"The sharply rising COVID infection rates across the UK, and concerns about fresh easing of restrictions, is likely to be behind the drop."

SPANNER IN WORKS

In Asia, Hong Kong was the worst-hit market after the United States warned businesses about the "growing risks" of operating in the city as China tightens its grip, raising concerns about its future as a financial hub.

With vaccines being rolled out around the world and some governments easing lockdowns, equities enjoyed a healthy first half of 2021, with many markets hitting records or multi-year highs as traders bet on a strong rebound from the pandemic.

But the spread of the highly transmissible Delta variant has thrown a spanner in the works as leaders in several countries - particularly those with slow inoculation programmes - reimpose lockdowns and other containment measures.

At the same time, surging inflation has rekindled speculation the Federal Reserve and other central banks could be forced to wind down their ultra-loose monetary policies and raise interest rates sooner than expected.

KEY FIGURES AROUND 1450 GMT

London - FTSE 100: DOWN 2.6% at 6,825.65 points

Frankfurt - DAX 30: DOWN 2.9% at 15,082.96

Paris - CAC 40: DOWN 3.0% at 6,266.48

EURO STOXX 50: DOWN 3.0% at 3,913.87

New York - Dow: DOWN 2.1% at 33,975.22

Brent North Sea crude: DOWN 5.7% at $69.37 per barrel

West Texas Intermediate: DOWN 6.5% at $67.16 per barrel

Tokyo - Nikkei 225: DOWN 1.3% at 27,652.74 (close)

Hong Kong - Hang Seng Index: DOWN 1.8% at 27,489.78 (close)

Shanghai - Composite: FLAT at 3,539.12 (close)

Euro/dollar: UP at $1.1808 from $1.1806 at 2100 GMT Friday

Pound/dollar: DOWN at $1.3669 from $1.3767

Euro/pound: UP at 86.38 from 85.76 pence

Dollar/yen: DOWN at 109.41 from 110.07 yen

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