New variant of Covid will excite global markets: oil fell by 5%

Registered Nurse Savana Wagstaff watches as Alisa Burns, a nursing student at Brigham Young University in Idaho, treats a coronavirus (COVID-19) positive patient in her isolation ward at Madison Memorial Hospital in Rexburg, Idaho, USA, October 28, 2021 of the year.

Shannon Stapleton | Reuters

Global markets went into a tailspin on Friday after news of a highly mutated variant of Covid-19, first spotted in South Africa.

The World Health Organization will meet on Friday to consider the emergence of variant B.1.1.529, which South African scientists say contains more than 30 mutations in the spike protein, a component of the virus that binds to cells. This is significantly more than the currently dominant Delta variant, which itself is highly contagious.

Many of these mutations are associated with increased antibody resistance and could affect a variant’s behavior with respect to vaccines, treatments and transmissibility, health officials said, although WHO said further research is needed to better understand the implications.

The pan-European Stoxx 600 fell 2.4% by mid-morning in Europe, with banks and travel companies suffering heavy losses, as did the oil and gas sector due to falling oil prices.

World benchmark Brent crude fell 5.3% to $ 77.89 a barrel during morning trading in Europe, while US crude fell more than 6.2% to $ 73.58.

In the US, US stock futures saw a drop in the Dow Jones Industrial Average of more than 800 points, while the Asia-Pacific markets fell sharply overnight, with the Hong Kong Hang Seng and Japanese Nikkei 225 declining more than 2.5%. …

The 10-year Treasury yield fell more than 11 basis points to 1.5277% at 4:00 am ET. The yield on 30-year Treasury bonds fell to 1.8798%. The yield changes in inverse proportion to prices, and 1 basis point is equal to 0.01%. Spot gold rose by about $ 19 to $ 1808 per troy ounce.

The variant was discovered in a Hong Kong quarantine hotel on a South African traveler, with one person in the corridor reportedly injured and the rest of the travelers isolated separately.

The UK government has banned flights from South Africa and Botswana, where cases of the new variant have also been reported, along with Eswatini, Lesotho, Namibia and Zimbabwe, from Friday noon to 4am Sunday. From now on, a mandatory 10-day quarantine period will be introduced for travelers from these countries.

Some analysts have suggested that the sharp market movements could be exacerbated by the decline in trading volumes due to the Thanksgiving holiday in the United States. US markets were closed on Thursday and will only be open until noon on Friday.

Cryptocurrencies did not escape the blow. Bitcoin has dropped 7% in the past 24 hours to $ 54,561, according to Coin Metrics, its lowest level since Oct. 8. The cryptocurrency has dropped 20% from an all-time high of nearly $ 69,000 earlier this month.

Bitcoin is often described by its supporters as “digital gold”, referring to the status of the yellow metal as a so-called safe asset.

Crypto investors say the virtual currency offers a store of value as well as inflation protection. Other cryptocurrencies also fell sharply on Friday. Ether, the second largest cryptocurrency, fell more than 10% to $ 4007, while XRP fell 10% to about 95 cents.

More cautious central banks

Jeffrey Yu, senior market strategist at BNY Mellon, told CNBC “Squawk Box Europe” on Friday that some market participants may believe news of this new option would give the Fed a reason to suspend monetary normalization, although it did not necessarily agree with this point. vision.

Yu said the recent resurgence of Covid cases in Europe, even before news of this latest option emerged, showed that “we are still going to be dealing with this for some time now, and there will be rounds of risk aversion that will hit the markets. out of fears of a pandemic. “

Stock Picks and Investing Trends from CNBC Pro:

Emmanuel Cau, head of European equity strategy at Barclays, said that with many major stock markets at or near record levels, a pullback seems “logical.”

“We have advised increasing barb sector allocation and hedging downward at these levels, but we believe sustained growth and patient central banks should continue to amortize over the medium term as long as investors have dry powder to buy in downturns,” Kau said. … email Friday.

“The key is to find out whether existing vaccines will remain effective against these options or not. Uncertainty about Covid could force central banks to be cautious. ”

– Vicky McKeever and Ryan Brown of CNBC contributed to this report.

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