New Covid-19 strain, markets falter, Black Friday

© Reuters

by Jeffrey Smith – Risky assets are faltering around the world after South Africa identified a new strain of the highly mutated Covid-19 virus that appears to have expelled variable deltas in its regions. The World Health Organization will hold an emergency meeting to determine if it represents a different “concern”. Stocks, emerging market currencies, cryptocurrencies, and oil are among the hardest hit asset classes. The news cast an additional shadow on this year’s Black Friday. Here’s what you need to know in the financial markets on Friday, November 26.

1. Identification of the new Covid-19 strain

South African health authorities, raising fears that they may be able to sidestep defenses of the current generation of vaccines.

The new strain, known as 1.1.529, soon became prevalent in those regions of Southern Africa where it was identified. He held an emergency meeting on Friday to discuss whether the strain posed a different kind of concern. If so, it will be given the name of the Greek letter “nu”.

Cases of the strain have already been identified in Hong Kong, in both cases in patients who have recently traveled to South Africa. It is not yet clear whether the disease is more dangerous to humans than the delta variant. However, the emergence of a new strain at a time when cases have already reached record levels in Europe will likely increase the risk of longer and more severe restrictions being imposed.

2. Markets stumble amid fears of a new wave of lockdown

Risky assets around the world grabbed the news badly, dropping more than 4% in some cases before stabilizing a bit.

In stocks, the familiar pattern of pandemic trading quickly reasserted itself, with travel and hospitality stocks outperforming and health and e-commerce stocks outperforming. In foreign exchange, safe haven currencies like and outperformed, while the dollar rose against commodity currencies, which forced another sharp repricing of interest rate risk.

Cryptocurrencies have also suffered due to forced liquidation. By 6:30 a.m. ET, it was down 5.4% to a seven-week low, while it was down 6.9%, down 7.8%, and down 6.2%.

3. US stocks prepare for heavy selling

US stock markets are set to open sharply lower later on, as reduced liquidity exacerbates the volume of moves. All travel-related stocks are set to open under pressure, with Boeing (NYSE) down 6.4% in the primary market, AirBNB down 6.9% and Marriott down 7.2%. Shares of airlines and cruise lines are inevitably the worst, dropping between 7% and 12%.

By 6:15 AM ET, it was down 812 points, or 2.3%, while it was down 1.9% and down 1.3%.

The news also fits with financial stocks, in reducing the chances of an early interest rate hike by the Federal Reserve. The big winners have been those early pandemic deals that have been aggressively shortened as the economic outlook has brightened in recent months, such as Zoom Video (NASDAQ:) shares and Peloton (NASDAQ:) shares.

4. Hit the prospects for Black Friday

The new Covid-19 virus has cast another shadow over what was already threatening to be another vulnerability to retailers, possibly making people think twice before increasing cash balances.

With many stores remaining closed Thursday, and others reluctant to encourage crowds of shoppers to pack up in stores, it’s not at all clear how the upcoming weekend of sales will shape compared to previous stores. Many retailers, especially in the fashion space, saw their stocks drop after warning of inventory shortages and supply chain restrictions in their September/October quarter earnings, and the Wall Street Journal cited Adobe (NASDAQ:) data on Friday suggesting that digital stock ” Out” messages are more than 260% higher than their levels two years ago.

Black Friday this year comes at a time when retail sales growth is showing signs of fatigue, after months in which American consumers slashed their savings due to the pandemic. It remains strong in October, however, up 1.3% month over month, the largest monthly increase since March.

5. Oil falls amid fears of a new setback for air travel

Crude oil was also on track for its worst day since July in response to the news, amid renewed concerns that travel restrictions will hit the temporarily recovering air travel market and possibly more domestic travel as well.

The recovery in air travel is a key component of the demand growth forecast for 2022, and represents the only major portion of oil demand that remains clearly behind 2019 levels.

The European Union and the United Kingdom have already suspended flights from South Africa, while the British ban extends to a few South African countries.

By 6:30 AM ET, futures were down 6.8% at $73.06 a barrel, after earlier hitting a two-month low, while crude futures were down 5.9% at $77.33 a barrel.

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