What to watch: New COVID-19 strain sparks global sell-off, Tier 4 hits Sports Direct, and Arcadia's Evans sold

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·4-min read
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. (Photo by Steve Parsons/PA Images via Getty Images)
Police and port staff turn away vehicles from the Port of Dover in Kent which has been closed after the French government's announcement it will not accept any passengers arriving from the UK for the next 48 hours amid fears over the new mutant coronavirus strain. Photo: Steve Parsons/PA Images via Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

New COVID-19 strain sparks global sell-off

European investors shifted into bearish mode on Monday after pandemic developments in the UK triggered fresh fears about the path of COVID-19.

Prime minister Boris Johnson held an emergency press conference on Saturday announcing the return of lockdown-like conditions for millions of people in London, the South East, and the East of England. The new Tier 4 restrictions were introduced to curb the rapid spread of a new variant of COVID-19, discovered last week. The prime minister said the new strain spreads up to 70% faster than the previous version of the virus.

On Sunday, multiple European countries closed their borders to Brits for fear of importing this new strain. This included France, which banned freight and people travelling from the UK. France’s ban will stand for an initial 48 hours.

The developments prompted a global sell-off for risk assets that was particularly acute in Europe.

The FTSE 100 (^FTSE) dropped as much as 2% in minutes when trade began on the London Stock Exchange, briefly wiping £33bn off the index. The FTSE 100 recovered some ground but remained down 1.3% after almost two hours of trading. The more domestically focused FTSE 250 (^FTMC) fell 2%.

European stock markets also dropped sharply. The CAC 40 (^FCHI) dropped 2.6% in Paris and the DAX (^GDAXI) fell 2.4% in Frankfurt.

US stock futures were mostly lower, despite lawmakers agreeing a new stimulus package after months of delays. The new package, worth $900bn, will see Americans receive $600 cheques from the government.

S&P 500 futures (ES=F) were down 0.7% and Dow Jones futures (YM=F) fell 0.5%. Nasdaq futures (NQ=F) were down 0.2%.

Beyond stocks, the pound came under serious pressure given the implications of the UK blockade for Britain’s economy and the failure to reach a Brexit deal by Sunday’s deadline. Sterling dropped 1.5% against the euro to €1.0858 (GBPEUR=X) and fell 2.1% against the dollar to $1.3226 (GBPUSD=X).

Markets were mixed in Asia overnight. Japan’s Nikkei (^N225) fell 0.2% and the Hong Kong Hang Seng (^HSI) dropped 0.7%. On mainland China, the Shanghai Composite (000001.SS) rose 0.7% and the Shenzen Component (399001.SZ) rallied 2%.

Tier 4 hits Sports Direct

Frasers Group (FRAS.L), the company that owns Sports Direct and House of Fraser, has scrapped its profit guidance, blaming new restrictions introduced by the UK government over the weekend.

Frasers Group said new “Tier 4” restrictions in London and the South East meant it could no longer commit to growing profits by 20% to 30%. All but essential retail must close under Tier 4 restrictions. Frasers, which is owned by billionaire Mike Ashley, said “virtually all” of its stores in Tier 4 areas would have to shut as a result.

Shares fell 8.5%.

Arcadia's Evans sold

Administrators for collapsed retail group Arcadia have secured the first sale of part of the business.

Administrators Deloitte said on Monday they had agreed to sell Arcadia’s Evans brand to Australia’s City Chic Collective (CCX.AX) for £23m ($30.4m) in cash. Both Evans and City Chic focus on plus-sized clothing for women.

“We had a successful partnership with Evans for many years which was a great channel for the City Chic brand in the UK,” Phil Ryan, City Chic’s chief executive said in a statement.

“Evans gives us an excellent foundation in a new geography to grow our collective and is a brand which aligns with our existing product streams.”

Shares in City Chic rose more than 10% in Sydney on the news.

Watch: Government scientist warns we should be ‘very concerned’ about new COVID-19 strain