Global markets fall sharply despite boost from US plan to relax Covid travel |

Global financial markets have fallen sharply amid concern over rising inflation and the threat of contagion in China’s property sector from the debt-stricken developer Evergrande, despite a boost from the relaxation of US travel rules.

Markets around the world came under selling pressure, with the FTSE 100 in the UK slumping by 60 points, or 0.9%, to 6,903.

Europe’s Stoxx 600, a pan-European index of listed companies, closed down 1.7%. Shares fell by more than 2% in Germany, France and Italy and 1.2% in Spain.

US markets were also down sharply in early afternoon trading in New York, with the Dow Jones losing almost 2%, the S&P 500 almost 2% lower and the tech-heavy Nasdaq down more than 2.4%.

It came despite a rally in airline shares after the US announcement of plans to partially lift a travel ban on UK and EU citizens imposed in response to Covid-19.

Shares in British Airways’ owner IAG soared 11%, making it the best performer on the FTSE 100, while the jet engine maker Rolls-Royce was also among top risers with shares ending the day up more than 4%. Shares in the German airline Lufthansa and Air France-KLM rose about 5%.

“The lifting of travel restrictions for double jabbed visitors to the US provided the thrust needed to send the recovery in airline stocks full throttle,” said Susannah Streeter, a senior investment and markets analyst at the investment firm Hargreaves Lansdown.

The rise in airline stocks helped London’s blue-chip index to claw back some losses from earlier on Monday. However, concerns over China’s heavily indebted property sector rattled markets on a choppy in dealing rooms across the City.

Analysts said that soaring energy costs and wider inflationary pressures risked upsetting the economic recovery from lockdown, at a time when growth in several advanced economies was slowing.

“Still nervousness hangs over the financial markets, with inflation worries nagging investors, particularly with gas prices sky high. Concerns are also mounting that problems are piling up in the Chinese economy due to the precariousness of Evergrande, the property conglomerate,” Streeter said.

Central banks, including the US Federal Reserve and Bank of England, will provide updates this week, with expectations among financial market investors for a gradual retreat from emergency pandemic stimulus at a delicate juncture for the economic recovery from Covid-19.

Walid Koudmani, a market analyst at the online trading firm XTB, said: “Investors will be keeping an eye on the upcoming central bank decisions later this week along with any new developments in the Chinese real estate market which could potentially cause a domino effect.”

The annual rate of UK inflation jumped by the most on record in August from the previous month, reflecting a rapid recovery from last year’s lockdown as well as a sharp jump in food, drink and energy prices.

Wholesale gas and electricity costs have surged to record levels in recent months, pushing several small energy providers into administration and threatening to boil over into a cost of living crisis for…