Concerns about the new Covid variant hit Asian markets, and oil prices
A woman stands in front of a closed sweets shop in downtown Bratislava on Thursday. Slovakia has announced a two-week lockdown after a spike in Covid-19 cases. (Photo by AFP)
Asian markets and oil prices sank while safe havens rebounded on Friday amid fears of a new type of Covid virus that scientists warn may be more contagious than deltas and even more resistant to vaccines, dealing a blow to the global recovery.
The B.1.1.529 strain has been blamed for a surge in new cases in South Africa and has already emerged in Hong Kong, where the World Health Organization is due to hold a meeting later in the day to decide whether it should be designated a variant of “interest” or “Anxiety”.
The discovery of the South African alternative has led to Britain and Israel banning all travel from the country and five others in South Africa as officials look to prevent it from spreading and expanding rapidly.
“Early analysis shows that this variant contains a large number of mutations that require and will be subject to further study,” the WHO said.
The news undermined confidence in Asian markets, which were already under pressure as traders prepare for the Federal Reserve to begin tightening monetary policy to stave off high inflation.
Stock markets and oil prices
The Stock Exchange of Thailand was down 10.87 points, or 0.66%, to 1,637.99 at 10.12 am. Shares of Thailand Airports plunged 2.57 baht, or 4.12 percent, to 64 baht.
Tokyo fell more than 2% while Hong Kong, Sydney, Singapore and Wellington fell more than 1%.
Travel-related businesses have been among the hardest hit as investors fear the prospect of further restrictions by governments.
Sydney-listed Qantas lost more than 5% and Hong Kong’s Cathay Pacific fell more than 2%. Macau casino operators have also been beaten up in Hong Kong.
Oil prices also fell sharply due to concerns about the impact on demand if new containment measures are introduced.
The flare-up of uncertainty also sent safe haven currencies higher with the yen – the go-to unit in times of turmoil – rising against the dollar.
The dollar advanced against other units, including a 1.9% gain on the South African rand.
“It’s a scary headline” about the virus, said Kyle Rhoda, of IG Markets, so it may have caused an unusual reaction.
The fact that US markets were closed for Thanksgiving on Thursday and trade will be thinner on Friday “means there is a missing wall of buyers,” which means moves will tighten.
However, Justin Tang of United First Partners said that while the recent news was worrying, “the world has been through this before with Delta” and that governments have been more adept at figuring out how to handle the situation. “Mutations are expected and nothing is unknown,” he said.
Traders are also watching cautiously for the Federal Reserve as it considers its next moves to fight inflation, which is at three-decade highs and threatening the US recovery.
Some bank officials have signaled a faster pace of winding down its broad bond-buying program, with an interest rate hike likely in mid-2022.
“The increased openness to accelerating the taper pace likely reflects somewhat higher-than-expected inflation over the past two months and greater comfort among Fed officials that the faster pace will not shock financial markets,” a team at Goldman Sachs said in a note. .