Global equities toppled on Friday as investors ran away with stocks in companies most exposed to the pandemic and sought refuge in shelters after the discovery of a new variant of coronavirus shook market sentiment.
A broad divestment of European equities followed similar movements in the Asian markets. Europe’s Stoxx 600 fell as much as 3.6 per cent. and fell 2.7 per cent. late in the morning. France’s CAC 40 index and German Dax fell 3 percent and 2.5 percent, respectively.
London’s FTSE 100 index fell 3 per cent. As a sign of market anxiety, shares in British Airways’ parent company IAG, the German airline Lufthansa and the aircraft manufacturer Airbus fell by about 10 per cent.
Other companies vulnerable to travel restrictions, such as WHSmith and business conference operator Informa, also fell, while pandemic recipients such as food delivery service Deliveroo and meal set company HelloFresh were among the slim number of winners on Friday. Oil benchmarks on both sides of the Atlantic fell more than 5 percent.
“Things have escalated on the Covid front pretty quickly over the last 12 hours,” said Jim Reid, a strategist at Deutsche Bank. Yesterday, the new variant “slowly began to gain increasing attention, but from one day to the next it has begun to dominate the markets,” he said.
The B.1.1.529 Sars-Cov-2 variant, first identified in Botswana, is thought to be behind an increase in Covid cases in southern Africa over the past week and has alerted global health officials because of its apparent ability to to avoid vaccines and spread faster than the Delta variant.
The EU and Britain moved to impose travel restrictions on a group of South African nations, while Israel has excluded travelers from South Africa. The World Health Organization is holding an emergency meeting on Friday to discuss the new variant, which has been described as the most worrying strain the researchers have yet encountered.
Hong Kong’s benchmark Hang Seng index fell 2.7 percent amid concerns that the new coronavirus strain could slow global economic recovery and further isolate the Asian financial center. Two cases of the variant were confirmed in Hong Kong late Thursday.
“I see on my screen today that there is almost nothing green – it’s all red,” said Andy Maynard, a Hong Kong-based retailer at investment bank China Renaissance. “It’s all on the tail of this Covid tribe.”
Elsewhere in Asia, Tokyo’s benchmark Topix index fell 2 percent 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 falling more than 6 per cent and Hong Kong flag carrier Cathay Pacific losing 4 per cent due to concerns over increased international travel restrictions.
Futures contracts that follow the Wall Street S&P 500 index fell 1.9 percent in early European trading. US stocks will trade for fewer hours on the Friday after the Thanksgiving holiday, something that could reduce trading volume and increase volatility on US stock markets.
The Vix index, a measure of expected volatility in U.S. equities over the next month, rose Friday by 7.6 points to 26, the biggest increase since early 2021.
Government debt increased as investors turned to assets traditionally considered to carry lower risk. The yield on the benchmark US 10-year government bond fell on Friday by 0.12 percentage points to 1.53 percent. The interest rate on its German equivalent fell 0.06 percentage points to minus 0.31 per cent. Japan’s yen, which typically rises in times of rising market anxiety, rose more than 1 percent against the dollar.
Meanwhile, oil prices were hit hard by Brent, the international crude oil marker, falling more than 5 percent to $ 77.78 per barrel. barrel, and the U.S. benchmark West Texas Intermediate from 6.7 percent to $ 73.13. The measures marked the steepest daily declines since July and follow this week’s move from the US, UK, India, South Korea, Japan and China to release strategic oil reserves, adding more supply to the market.
“The sudden emergence of a new variant of coronavirus raises serious concerns about economic growth and the oil balance in the coming months,” said Tamas Varga of the brokerage firm PVM.
Industrial metals were also lower, with copper falling 2 percent to $ 9,558 per tonne. tons and aluminum 2.1 percent weaker at $ 2,658. Concerns about the real estate sector in China also weighed in this market.
Gold, however, received the weak market trend and rose $ 18.5, or 1 percent, to $ 1,802 per troy ounce as investors looked for safe places to park cash.
“The gold price should remain supported in this environment and the topic of downsizing should go in the back seat for the time being,” said Alexander Zumpfe, precious metals dealer at the German industrial group Heraeus.