The FTSE 100 has fallen to its lowest level in six months as fears grow that the UK may need a national lockdown to limit the spread of COVID-19.
The index fell 1.9% in the first few hours of Wednesday trading, while the domestically-focused FTSE 250 lost 1.5% to hit its lowest point in more than three weeks.
Analysts pointed to growing concerns about the effect the coronavirus pandemic could have on the country during the winter, after reports that the second wave could be more deadly than the one seen during spring.
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Winter will be ‘most difficult period’ ever
Deutsche Bank’s Jim Reid said: “The problem with the second wave is that although we are far better prepared than we were for the first wave, the reality is that the first wave occurred late in the traditional flu/cold/virus season.
“The second wave still hasn’t even hit November or December yet and we’re still seeing cases soar in many places.”
Parts of the UK have already brought in tighter restrictions in an effort to halt the virus, as the number of new cases hovers around 20,000 a day.
There are fears that these restrictions – especially if they spread to cover more of the country – will reverse the tentative economic recovery seen during the summer.
The UK’s Vaccine Taskforce boss has warned that the first generation of vaccines “is likely to be imperfect” and “might not prevent infection”.
A study also found that the number of people with antibodies fell 26% since lockdown was eased over summer.
A safe and effective vaccine is seen as one of the few ways for the world to move past the pandemic – the other being a widely-effective cure.
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Protests mount against Tier 3 measures
Markets reacted similarly across Europe, with the pan-European STOXX 600 falling 2.6% to its lowest level since late in May. Just before 10am UK time, it had recovered slightly to be down 1.9%.
This comes as fears grow of a new national lockdown in France, with president Emmanuel Macron to give a televised address later tonight.
France’s CAC 40 was down 2.7%.
The German DAX was down 2.9%, with Reuters reporting that Germany‘s chancellor Angela Merkel wants to close restaurants and bars from 4 November.
Emmanuel Macron and Angela Merkel both appear set to toughen restrictions in France and Germany
John Woolfitt, director of trading at Atlantic Capital Markets, said: “Global markets look incredibly nervous – the mix of rising COVID-19 cases and deaths and the potential full lockdown in France, add this to the uncertainty ahead of the US elections and you have a very poor backdrop.
“I don’t expect this to be long-term, but nervousness will continue until elections are done and some form of steadying in the COVID-19 numbers.”