LONDON, Nov 26 — UK’s blue-chip index slumped today and was on course for its biggest drop in more than a year, as fears over a newly detected and possibly vaccine-resistant coronavirus variant gripped global stock markets.

The FTSE 100 index declined 3 per cent in morning trade and hit its lowest in more than seven weeks, with commodity, travel, and banking stocks leading the sell-off.

Britain said the virus variant spreading in South Africa was considered by scientists to be the most significant one found yet and so it needed to ascertain whether it made vaccines ineffective.

Tourism group TUI fell 9.7 per cent while airline companies like Wizz Air, Easyjet and British Airways-owner IAG lost 6.8 per cent to 10.1 per cent after UK authorities imposed travel restrictions from South Africa and five neighbouring countries.

“We don’t know so much about this variant yet but if it’s serious, it could change the macro scenarios altogether,” said Roland Kaloyan, head of European equity strategy at Societe Generale.

“The Bank of England will not hike rates in a period where we can enter lockdown and put serious burden on the economy.”

Supply-chain worries and inflationary pressures have kept the FTSE 100 under pressure, with the blue-chip index lagging its European peers so far this year.

Shares of major UK lenders HSBC, Lloyds Bank and Barclays all fell close to 5 per cent as investors scaled back their expectations for an interest rate hike in December.

“Over the last month, the banking sector has benefited from a steeper yield curve but with the news today we see a lower bond yield and that’s also not quite positive for the long term,” said Kaloyan.

Energy and mining stocks fell 5.4 per cent and 3.9 per cent, respectively, tracking a slump in commodity prices on fresh economic slowdown fears.

The domestically focussed mid-cap index dropped 2.3 per cent, faring a bit better than its blue-chip counterpart as online trading platform Plus500 and CMC Markets gained ground. — Reuters