European stocks posted their worst session in more than year on Friday, as reports of a newly identified and possibly vaccine-resistant SARS-CoV-2 variant stoked fears of a fresh hit to global economy and drove investors out of riskier assets.
The benchmark STOXX 600 fell 3.7 percent. It had slid as much as 3.6 percent in early trading, while the volatility gauge for the main stock market hit its highest in nearly 10 months. For the week, it plunged 4.53 percent.
Little is known of the variant detected in South Africa, Botswana and Hong Kong, but scientists said it has an unusual combination of mutations and might evade immune responses or make it more transmissible.
France’s CAC 40 shed 4.75 percent, leading regional markets lower as shares in plane maker Airbus SE, shopping center operator Unibail SE and Safran SA fell 10 to 11 percent each.
UK’s FTSE 100 dropped 3.64 percent, while Germany’s DAX fell 4.15 percent and Spain’s IBEX lost 4.96 percent.
Cyclical-heavy European stock markets have already been under stress this week as a resurgence in COVID-19 cases prompted new restrictions in several countries.
“While COVID still has an impact on market sentiment, it is not the dominant driver it was a year ago. Political and economic agendas have more breadth,” Hargreaves Lansdown head of investment analysis Emma Wall said. “That said, should we have a difficult winter with returned restrictions expect to see those stock sectors which were most vulnerable before wobble — retail, leisure, entertainment and travel.”
Travel and leisure stocks were down 3.9 percent after falling as much as 7 percent after the UK announced a temporary ban on flights from South Africa and several neighboring countries from Friday. The EU is also planning similar moves.
Shares in British Airways owner IAG and EasyJet Holdings PLC, cruise operator Carnival Corp PLC and travel company TUI Group fell 9 to 10 percent.
Oil and gas producers dropped 4.3 percent, while miners tumbled 3.5 percent as oil and metal prices lost ground as reports of the new virus variant fueled economic slowdown worries.
Tracking falls in bond yields, the banking index dropped 4.4 percent, while some stay-at-home stocks, including Delivery Hero SE and Just Eat Takeaway.com NV rose about 3 percent.
The virus scare prompted eurozone money markets to scale back bets of a rate hike from the European Central Bank next year. Odds of a 10 basis point rate hike in December next year almost halved from a full 100 percent earlier this week.
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