Stock markets across Europe have fallen after sharp declines in Asia on fears COVID-19 restrictions in China could hit supply chains and the global economy.
Authorities in Beijing have implemented mass testing in one area of the city following a small outbreak of cases.
But there are concerns the capital could follow Shanghai by enforcing a lockdown to contain the spread. London’s leading FTSE 100 share index tumbled, led by commodities firms such as oil producers and miners.
The FTSE clawed back from some losses from morning trade but the index closed the day 1.8% down. Germany and France recorded similar declines.
In the US, both the Dow Jones Industrial Average and the S&P 500 opened lower. Overnight China’s Shanghai Composite Index fell by more than 5% while Hong Kong’s Hang Seng closed 3.7% lower.
“The scourge of COVID-19 continues, with China unwavering in its zero tolerance policy,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“As cases erupt in Beijing, there is concern that prolonged lockdowns will hit employment and lead to a sharp slowdown in growth as well as sparking fresh shipping logjams and supply chain issues.”
Oil prices also fell on Monday, with Brent crude down 4.7% at $101.41 a barrel on the prospect of falling demand from China, the world’s second largest economy after the US.
Oil giants such as BP and Shell saw their share prices fall on Monday. Shares in mining giants such as Anglo American, Glencore and Rio Tinto were also among the biggest losers in early trading.
Shanghai has been in lockdown for several weeks – but the daily death rate from COVID-19 is rising and there are now thousands of known cases. In Beijing, there has been panic buying, as residents there fear they will soon face hefty restrictions of their own.
With China’s “zero COVID” policy under pressure as never before, there are growing concerns about the impact all of this will have on the country’s economy. Small wonder, then, that shares in Shanghai and Hong Kong have been tumbling.