Market Loop - 😯Black (Market) Friday

STOCK MARKET
Stock markets rocked by new Covid variant

What’s going on?
On Friday global stock markets suffered their biggest one day slide in over a year amid alarm about a new variant of Covid-19.
In the UK, the FTSE 100 fell 3.6%, erasing £72bn in value over fears of even more disruption to business and travel.

Why is this important?

Last Friday was supposed to be a chilled day as the consumers focused their attention on Black Friday bargains. But instead we all learned a new word – Omicron - the name assigned by the World Health Organization to a new Covid "variant of concern." 

Omicron is concerning because it has a large number of mutations, some of which could potentially make it more transmissible and resistant to vaccines.

The first cases were reported in South Africa and over the weekend more were detected in Africa, Europe and Australia. The UK quickly imposed tough travel restrictions on southern African countries and will reintroduce mask wearing rules in shops and public transport this week.

The global economy is still recovering from nearly two years of Covid disruption and another variant could lead to more lockdowns and restrictions.

Airlines were the most sold stocks with IAG, the owner of British Airways, falling more than 14% and EasyJet sunk 12%. 

Oil prices fell 13% - the biggest fall of the year - on concerns that demand for fuel could drop if more travel restrictions are imposed.

The emergence of Omicron has also called into question what will happen to interest rates. The Bank of England had been expected to raise rates soon to combat rising inflation, but with the uncertainty over the new variant it’s expected that they will put that on hold.

Takeaway
The next few weeks will be critical to determine just how much of a worry Omicron is. If it does prove to be more resistance to vaccines and results in more hospitalisations and deaths then global stock markets could be in for a choppy end to the year. This is against an already nervous economic backdrop of supply chain and inflation fears.

FINTECH
Klarna losses balloon

Fintech start-up Klarna posted a huge increase in losses in the first nine months of this year driven by soaring costs as demand for its buy now, pay later (BNPL) services increased.

The company reported a pre-tax loss of $344m from January to September, a fourfold increase on 2020.

Founded in Stockholm in 2005, Klarna pioneered BNPL which allows customers to spread purchases over multiple interest-free payments instead of using a credit card. The sector has flourished in recent years as online shopping has rocketed during the pandemic. Klarna was valued at $46bn earlier this year and is expected to list on the stock market in the near future.

The company has launched in nine new markets since the start of 2020 and now has over 90m customers worldwide. It has 15m users in the UK alone spending £2.7bn a year.

A recent survey found that one in five Brits are planning to use BNPL during Christmas, to spread out the costs.

Last month Klarna struck a deal with fellow tech giant Stripe, that makes Klarna's buy-now-pay-later payment options available to millions of internet businesses across 20 countries including the UK and US.

Not wanting to be left out, big tech companies are now jumping on the BNPL bandwagon. Apple and Amazon are partnering up with American Affirm, while Square has just agreed to buy Australian Afterpay for $29bn.