Irish shares hit and global oil price slides amid fears of return of European lockdowns   

Prominent Irish shares fell while economists assess whether the European Covid-19 surge will be repeated in North America

People gather on the shopping street Marienhilfer Strasse in Vienna, Austria, on Friday. Austrian Chancellor Alexander Schallenberg says the country will go into a national lockdown to contain a fourth wave of coronavirus cases. Mr Schallenberg said the lockdown will start Monday, Nov.22 and initially last for 10 days. Picture: Lisa Leutner/AP

Fears Germany will follow Austria and reimpose harsh Covid-19 restrictions as soon as Monday came back to haunt Irish and other European airline, hospitality, and tourism shares even as tech stocks rallied across the world on bets of a return to widespread home working.           

Investors fled to so-called haven investments such as gold and sovereign bonds, while the global price of crude oil slid, after Germany's top health official refused to rule out re-imposing strict measures following a surprise move by Austria.

Only on Thursday, Chancellor Angela Merkel’s government increased pressure on Germans to get inoculated and starting next week, Bavaria -- Germany’s state with the highest infection rate -- will close clubs and bars, while shops will have to reduce capacity and restaurants will have to shut by 10pm. 

Prominent Irish shares fell along with the sell-off of global stock markets. The banks -- AIB, Bank of Ireland, and Permanent TSB -- fell by up to 4% and Ryanair shed 2%. In London, IAG, which owns Aer Lingus, British Airways, Iberia, and Vueling, dropped 3.5%.

Other shares, however, such as building products giants CRH and Kingspan, as well as packaging firm Smurfit Kappa, which had been hit hard in the during the lockdowns last year, were unscathed this time. Irish Ferries-owner ICG were also unchanged. The price of crude oil slid to $79 a barrel.

Dermot O'Leary, chief economist at Goodbody, said "the surprising moves" by Austria and Germany had  put lockdowns back on the agenda in Europe. 

Measures by Israel to control its latest surge in the pandemic showed lockdowns may not be needed but that investors nonetheless fear European governments will "adopt a hammer approach" to the latest wave of the pandemic, Mr O'Leary said.

"Modest restrictions have begun today in Ireland, but the announcements in Austria and Germany go well beyond this, with lockdowns and, for the first time, vaccine mandates, being part of the toolkit," Mr O'Leary said. "It is a concern that both Germany and Austria have among the highest ICU (Intensive Care Unit) capacities in the world, yet is introducing these measures," he said. 

Chris Beauchamp, chief market analyst at online broker IG, said that European lockdowns were back on the agenda and the wave of selling had hit global oil and US stock markets, as well as UK housebuilders.

"Moving to the US, and it is the Dow and the Russell 2000 that are taking the big hit. Tech stocks are, unsurprisingly, rallying hard as investors go back to their 2020 habits of buying stocks designed to benefit from people being stuck at home," Mr Beauchamp said. 

Economists are also assessing whether the European Covid surge will be repeated in North America.

"While the recent performance of [US] sales and production has been encouraging, the possibility of another winter wave of coronavirus infections represents a significant downside risk to activity over the next few months," said Paul Ashworth, chief economist for North America at Capital Economics. 

"The colder weather has already triggered a big resurgence in infection rates in Europe and, with US vaccination rates generally lower, there is a risk of a seasonal surge in the Midwest and Northeast," Mr Ashworth said.