Global stocks tumbled on Friday as investors dashed out of shares in companies most exposed to the pandemic and sought shelter in havens after the discovery of a new coronavirus variant shook market sentiment.
A broad sell-off in European shares followed similar moves in Asian markets. Europe’s Stoxx 600 fell as much as 3.6 per cent, and was down 2.7 per cent in late-morning trading. France’s CAC 40 index and Germany’s Dax were down by 3 per cent and 2.5 per cent respectively.
London’s FTSE 100 index dropped 3 per cent. In a sign of the market anxiety, shares in British Airways parent IAG, German carrier Lufthansa and aircraft maker Airbus dropped around 10 per cent.
Other companies that are vulnerable to travel curbs, such as WHSmith and business conference operator Informa also fell, while pandemic beneficiaries like food delivery service Deliveroo and meal kit company HelloFresh were among the slim number of gainers on Friday. Oil benchmarks on both sides of the Atlantic fell more than 5 per cent.
“Things have escalated on the Covid front quite rapidly over the last 12 hours,” said Jim Reid, a strategist at Deutsche Bank. Yesterday, the new variant “was slowly starting to gather increasing attention but overnight it has begun to dominate markets,” he said.
The B.1.1.529 Sars-Cov-2 variant, first identified in Botswana, is believed to be behind a surge in Covid cases in southern Africa over the past week and has alarmed global health officials because of its apparent ability to evade vaccines and spread more quickly than the Delta variant.
The EU and UK moved to impose travel restrictions on a group of southern African nations, while Israel has banned travellers from South Africa. The World Health Organization will hold an emergency meeting on Friday to discuss the new variant, which has been described as the most concerning strain yet encountered by researchers.
Hong Kong’s benchmark Hang Seng index shed 2.7 per cent amid concerns that the new coronavirus strain could slow the global economic recovery and further isolate the Asian financial hub. Two cases of the variant were confirmed in Hong Kong late on Thursday.
“I look at my screen today there’s hardly any green — it’s all red,” said Andy Maynard, a Hong Kong-based trader at investment bank China Renaissance. “It’s all on the tail of this Covid strain.”
Elsewhere in Asia, Tokyo’s benchmark Topix index fell 2 per cent on Friday after the UK banned direct flights from six countries including South Africa until quarantine hotels were up and running.
Travel stocks were among the hardest hit, with Japan Airlines down more than 6 per cent and Hong Kong’s flag carrier Cathay Pacific shedding 4 per cent on worries over increased international travel restrictions.
Futures contracts tracking Wall Street’s S&P 500 index were down 1.9 per cent in early European trading. US stocks will trade for fewer hours on Friday following the Thanksgiving holiday, something that could lessen trading volumes and heighten volatility on American bourses.
The Vix index, a measure of expected volatility in US stocks over the next month, rose by 7.6 points on Friday to 26, the biggest increase since early 2021.
Government debt rallied as investors turned to assets traditionally seen as carrying lower risk. The yield on the benchmark US 10-year Treasury note fell 0.12 percentage points to 1.53 per cent on Friday. The yield on its German equivalent declined 0.06 percentage points to minus 0.31 per cent. Japan’s yen, which typically rises during times of rising market angst, climbed more than 1 per cent against dollar.
Meanwhile, oil prices were hit hard with Brent, the international crude marker, down by more than 5 per cent at $77.78 a barrel, and US benchmark West Texas Intermediate off 6.7 per cent at $73.13. The moves marked the steepest daily falls since July and follow this week’s move by the US, UK, India, South Korea, Japan and China to release strategic oil reserves, adding more supply to the market.
“The sudden appearance of a new variant of the coronavirus raises serious concerns about economic growth and the oil balance in the coming months,” said Tamas Varga of brokerage PVM.
Industrial metals prices were also lower, with copper sliding 2 per cent to $9,558 a tonne and aluminium 2.1 per cent weaker at $2,658. Concerns about the property sector in China also weighed on this market.
Gold bucked the weak market trend, however, rising $18.5, or 1 per cent, to $1,802 a troy ounce as investors looked for safe places to park cash.
“The gold price should remain supported in this environment and the topic of tapering should take a back seat for the time being,” said Alexander Zumpfe, precious metals dealer at German industrial group Heraeus.
