By Geoffrey Smith
Investing.com — Risk assets around the world are collapsing after South Africa identified a new strain of the highly mutated Covid-19 virus that appears to have displaced the delta variant from the regions where it was located. The WHO is holding an emergency meeting to determine whether there is an ‘of concern’ variant. Stocks, emerging market currencies, cryptocurrencies and oil are among the hardest hit asset classes. The news casts an additional shadow over this year’s Black Friday. Here’s what you need to know in the financial markets on Friday, November 26.
1. New Covid-19 strain identified
Health authorities in South Africa, raising fears it could avoid defending the current generation of vaccines.
The new species, known as 1.1.529, quickly became the dominant one in the regions of South Africa where it was identified. It called an emergency meeting Friday to discuss whether the strain constitutes a variant of concern. If so, it will be named after the Greek letter ‘now’.
Incidences of the strain have already been established in Hong Kong, in both cases in patients who had recently traveled to southern Africa. It is not yet clear whether the disease is more dangerous for humans than the delta variant. However, the emergence of a new strain at a time when cases in Europe are already reaching record highs likely raises the risk of longer and stricter restrictions.
2. Markets tumble on fear of new lockdown wave
Risk assets around the world reacted badly to the news, falling more than 4% in some cases before stabilizing a bit.
In equities, the familiar pattern of pandemic trading quickly returned, with travel and hospitality stocks underperforming and health and e-commerce stocks outperforming. In foreign currencies, port currencies such as and outperformed, while the dollar rose against commodity currencies and , which was forced into another sharp revaluation of interest rate risk.
Crypto currencies also suffered from forced liquidations. At 6:30 a.m. ET, 5.4% had fallen to a seven-week low as 6.9% fell, fell 7.8% and fell 6.2%.
3. US stocks on track for a sharp sell-off
US equity markets are later expected to open sharply lower, with low liquidity exacerbating the magnitude of the moves. All travel-related stocks will open under pressure, with Boeing (NYSE:) down 6.4% in premarket, AirBNB down 6.9% and Marriott shares down 7.2%. Stocks of airlines and cruise lines are inevitably the worst, at between 7% and 12%.
By 6:15 AM ET, they were down 812 points, or 2.3%, as they fell 1.9% and fell 1.3%.
The news also applied to financial stocks, as it reduced the likelihood of an early rate hike by the Federal Reserve. The biggest winners were those early pandemic trades that were aggressively shorted as the economic outlook brightened in recent months, such as Zoom Video (NASDAQ:) stocks and Peloton (NASDAQ:) stocks.
4. Black Friday Prospects Strike
The new Covid-19 has cast a new shadow over what was already threatening to become another understated for retailers, perhaps making people think twice before lowering cash balances further.
With many stores remaining closed on Thursday and others reluctant to encourage crowds of shoppers to pack in stores, it’s not at all clear how this coming weekend’s sales will progress from the previous one. Several retailers, especially fashion, saw their inventories plummet after warnings of inventory shortages and supply chain restrictions in their September/October quarterly results, and the Wall Street Journal on Friday quoted Adobe (NASDAQ:) data suggesting that digital ” out of stock’ messages are up more than 260% from two years ago.
Black Friday this year comes at a time when retail sales growth is showing signs of fatigue, after months in which U.S. consumers have used up pandemic-induced savings. however, remained strong in October, rising 1.3% month-on-month, the largest monthly increase since March.
5. Oil is slipping amid fear of new air travel setback
Crude oil was also on track for the worst day since July in response to the news amid resurgent fears that mobility restrictions will hit a tentatively recovering market for air travel and perhaps more local travel.
The recovery in air traffic is an important part of the forecasts for demand growth in 2022, and represents the only major part of oil demand that is still clearly below 2019 levels.
The European Union and the UK have already suspended inbound flights from South Africa, while the UK ban applies to a handful of South African states.
At 6:30 a.m. ET, futures were down 6.8% to $73.06 a barrel, having previously hit a two-month low, while crude futures fell 5.9% to $77.33 a barrel.