The FTSE 100 is down 3% today! Here’s what’s going on

The FTSE 100 index opened down almost 3% this morning and is currently trading at 7,090 points. Considering that when the market closed yesterday there wasn’t any real cause for alarm, this is quite a shift. The main reason causing the dump is news of a new Covid-19 variant, known as B.1.1.529. With the US out for Thanksgiving, it means that there was lower trading volume in the stock market overnight. This can also contribute to more erratic moves.

The new Covid-19 variant

Over the past week, South Africa has seen a surge in new case numbers. Concern has been growing in recent days about the ability of the new strain to evade vaccines and transmit faster that the Delta variant and others. Overnight, the UK announced that it’s putting six southern Africa nations on the travel red list. The WHO has also announced that it’s holding an emergency meeting today to discuss the new variant.

People are clearly trying to think ahead about what this could mean further down the line. Hong Kong has already recorded a couple of cases of the new variant, so it’s clear that it can spread around the world very quickly. In fact, it might be present in other countries (the UK included) for all we know right now.

The fall in the FTSE 100 isn’t just an isolated incident reflecting concern for the UK. Equity markets around the world are down by a similar amount. 

What it means for the FTSE 100

At the moment, it’s too early to say what this means for my FTSE 100 investments for the future. When I look at the biggest losers today, it’s clear where the biggest hits are coming. The travel and tourism industry has been hit hard. Airlines such as the International Consolidated Airline Group are down almost 10%.

Banking stocks are also down heavily, with Lloyds Banking Group down 5%. This is because the Bank of England is potentially going to be more reluctant to raise interest rates next month given the uncertainty of the virus. Higher interest rates are good for banks, so no hike could be damaging, especially when a lot of people (myself included) thought that rates would rise.

However, the main thing in situations like this is not to panic. For all we know, this could be an overreaction by the markets. The variant may prove to be contained, and covered by the current vaccine. In that case, this could simply be a short-term wobble for the FTSE 100. Therefore, I won’t be selling everything this morning! Ultimately, this could prove to be a good buying opportunity, but I want to see how things progress following the WHO meeting.

Therefore, I’m going to sit on my hands for the next few days and see what new information we get before making any decisions. 

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.