Global equities plunged on Friday as investors abandoned their shares in companies most exposed to the pandemic and sought refuge in paradise after the discovery of a new coronavirus strain shook market sentiment.
A broad sell-off in European equities followed similar moves in Asian markets. The European Stoxx 600 fell 3.1 percent in morning trading, the French CAC 40 index and Germany’s Dax 30 fell by similar margins.
London’s FTSE 100 index fell 3.2 percent. Shares in British Airways parent IAG, German airline Lufthansa and aircraft manufacturer Airbus fell by about 10 percent in a sign of market turmoil.
Other companies vulnerable to travel restrictions, such as WHSmith and business conference operator Informa, also fell, while pandemic beneficiaries such as food delivery service Deliveroo and meal-package company HelloFresh were among the few winners on Friday. Oil benchmarks on both sides of the Atlantic fell more than 5 percent.
“Things have escalated quite rapidly on the Covid front in the past 12 hours,” said Jim Reid, a strategist at Deutsche Bank. Yesterday, the new variant “slowly started to gain more attention, but overnight it started to dominate the markets,” he said.
The B.1.1.529 Sars-Cov-2 variant, first identified in Botswana, is believed to be the cause of an increase in Covid cases in southern Africa over the past week and has alarmed global health officials over its apparent ability to evade and spread vaccines faster than the Delta variant.
The EU and UK have moved to impose travel restrictions on a group of South African countries, while Israel has banned travelers from South Africa. The World Health Organization is holding an emergency meeting Friday to discuss the new variant, which has been described as the most worrisome species researchers have encountered yet.
Hong Kong’s Hang Seng Index lost more than 2.5 percent on concerns that the novel coronavirus strain could slow the global economic recovery and further isolate the Asian financial center. Two cases of the variant were confirmed late Thursday in Hong Kong.
“I’m looking 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 in the tail of this Covid strain.”
Elsewhere in Asia, Tokyo’s Topix index fell 2 percent on Friday after the UK banned direct flights from the six countries, including South Africa, until quarantine hotels were operational.
Travel stocks were hardest hit, with Japan Airlines falling more than 6 percent and losing 4 percent of Hong Kong’s flag carrier, Cathay Pacific, amid concerns over increased international travel restrictions.
Futures contracts tracking Wall Street’s S&P 500 index fell 1.9 percent in early European trading. US stocks will trade fewer hours on Friday after the Thanksgiving holiday, something that could reduce trading volumes and increase volatility in US exchanges.
Government debt rose as investors turned to assets traditionally viewed as lower risk. The yield on the US 10-year Treasury as a benchmark fell by 0.12 percentage points to 1.53 percent on Friday. The yield on its German equivalent fell by 0.07 percentage point to minus 0.32 percent. The Japanese yen, which has typically risen in times of mounting market fears, climbed more than 1 percent against the dollar.
Meanwhile, oil prices were hit hard with Brent, the international oil marker, up more than 5 percent to $77.78 a barrel, and the US benchmark West Texas Intermediate down 6.7 percent to $73.13. The moves marked the steepest daily declines since July and follow this week’s move by the US, UK, India, South Korea, Japan and China to release strategic oil reserves, bringing 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 falling 2 percent to $9,558 a ton and aluminum weaker by 2.1 percent at $2,658. Concerns about the real estate sector in China also weighed on this market.
However, gold resisted the weak market trend and rose $18.5, or 1 percent, to $1,802 a troy ounce as investors looked for safe places to park cash.
“Gold prices should remain supported in this environment and the topic of tapering should remain in the background for now,” said Alexander Zumpfe, precious metals trader at German industrial group Heraeus.