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New Covid-19 variant hits travel and markets

Last Week in the City provides a round-up of the market movements and the global investing outlook for the week ending 26 November 2021.

| 7 min read

Concerns over a potentially dangerous new variant of the Covid-19 virus hit global markets on Friday. Scientists expressed concern over its ability to evade vaccines and transmit faster than the Delta variant of the infection on Thursday evening. US markets were closed for Thanksgiving on Thursday, so investors were left to ponder the impact of the news on the direction of US markets when they reopened, which added to the pot of uncertainty.

Away from the pandemic, inflation continues to be the top worry for investors as shoppers brought forward Christmas spending to escape supply shortages that have contributed to the current jump in the cost of living. The boss of one of the biggest fertilizer companies in the world also warned high gas prices could hit fertilizer production, raising food prices.

The blue-chip FTSE 100 index was down 1.4% over the week with the more UK-focused FTSE 250 falling 3%.

Recent changes mean planning your retirement is now more important than ever if you want to have the standard of living you desire when you give up the ‘9 to 5’.

Covid-19 variant

Britain will introduce travel restrictions to and from six African nations due to a new Covid-19 variant. UK Health Secretary Sajid Javid said the new B.1.1.529 variant identified in South Africa "may be more transmissible" than the Delta strain – and warned, "the vaccines that we currently have may be less effective". Susan Hopkins, the UK Health Security Agency's chief medical adviser, said it was the "most worrying" variant of the virus yet. However, information remains scant – and the situation remains unclear in terms of resistance and transmissibility. Infections caused by the new variant in Germany do not appear to have boosted the rate of hospitalisations in that country yet. Flights from South Africa, Namibia, Lesotho, Botswana, Eswatini and Zimbabwe to the UK will be suspended and new arrivals in the UK will be required to quarantine in hotels.

  • 882,000 Covid-19-related deaths in the EU so far

The news about the emergence of a concerning Covid-19 variant hit the travel sector hard on Friday. Airline shares such as British Airways-owner IAG and easyJet stalled, with hotels groups such as InterContinental Hotels and Accor joining package holiday group Tui in reversing recent gains.

The World Health Organisation (WHO) warned Europe could potentially see another 700,000 deaths from Covid-19 by March 2022, describing the continent as the “epicentre” of the current phase of the pandemic. Following 882,000 deaths from Covid-19 in the European Union in the pandemic so far, what does the continent’s “fourth wave” mean for its economy?

Online electricals retailer AO World warned that pandemic-related supply issues will cause shortages of the Xbox, PlayStation and iPhone this Christmas. AO shares slumped hard as management slashed its market guidance for the festive period, putting the main blame on a global shortage of computer chips.

Economics

Away from the pandemic, inflation continues to be at the top of investors’ lists of concerns. Shoppers face the biggest price rises in more than 30 years this Christmas after fears of widespread shortages resulted in more Britons starting their Christmas shopping in November this year. A survey of retailers published by the Confederation of British Industry (CBI) found that customer concerns about empty shelves this month had sent prices skyrocketing. The CBI said its monthly retail sales balance, which asks retailers to say if annual sales growth is rising or falling, rose to a three-month high of +39 in November – up from +30 in October. So-called “Black Friday is predicted to be the largest yet seen in the UK, but retail analysts warned consumers to expect less-generous discounts and shortages of some products due to supply issues.

  • 33.8% America's peak savings rate in the pandemic.

The US savings rate, usually around 7.5%, peaked at 33.8% in April 2020 as pandemic lockdowns limited the opportunity to spend. Will consumers spend or save this windfall?

Geopolitics

As Joe Biden firms up the leadership of the all-important US Federal Reserve, the nitty-gritty of his tax and spending plans is yet to be agreed. Incumbent Jerome Powell was nominated for a second term as chair of the world’s most important central bank. Mr Powell is set to stay in the role, which includes managing inflation and regulating the financial system, for a further four years.

Commodities

The US pledged to release 50 million barrels of oil from its strategic reserves to bring down soaring energy and petrol prices. Co-ordinated action is also being taken in other major oil-consuming nations, including China, India, Japan, South Korea and the UK. President Biden has repeatedly asked Opec to boost output more rapidly to ease global drivers of inflation – but to no avail. News of the parallel action coupled with demand concerns stemming from news of the new Covid-19 variant sent crude prices to a two-month low.

Food prices worldwide are rising and this will hit the world's poor.

Svein Tore Holsether, CEO, Yara

A global shortage of fertilisers will drive up food prices and leave poorer countries facing a food crisis, according to the head of fertiliser manufacturer Yara International. Svein Tore Holsether said that higher natural gas prices are pushing up the cost of fertiliser production and, as a consequence, food prices worldwide are rising and this will hit the world's poor. Mr Holsether said the large amount of gas required to make fertiliser had forced Yara to cut some production – and shortages of this vital feedstock in the global food chain were now emerging. What is the future of food?

Technology

Technology giant Apple is suing Israeli spyware company NSO Group and its parent company for allegedly targeting iPhone users with a hacking tool. NSO's Pegasus software can infect both iPhones and Android devices, allowing operators to extract messages, photos and emails, record calls and secretly activate microphones and cameras. Management at the Israeli group say its tools were developed to help authorities target terrorists and criminals. However, the spyware has also been used to target activists, politicians and journalists, which resulted in the US officially putting NSO on a trade blacklist.

Pay and conditions at the world’s largest retailer were once again in focus as an international coalition of unions, equality and environmental groups called "Make Amazon Pay" staged a day of action to coincide with Black Friday, demanding concessions from management. Protests were staged in 20 countries on what is among Amazon's busiest day of the year.

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New Covid-19 variant hits travel and markets

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