Stock and oil prices drop as the new Corona virus spreads in the markets

Global stocks fell on Friday as investors moved away from stocks of companies most exposed to the pandemic and sought refuge after the discovery of a new coronavirus variable that rocked market sentiment.

A broad sell-off in European stocks followed similar moves in Asian markets. The European Stoxx 600 Index fell 3.1 percent in morning trade, with France’s CAC 40 and Germany’s DAX 30 sliding by similar margins.

The FTSE 100 index in London fell 3.2 per cent. In a sign of market jitters, shares in British airline IAG, German airline Lufthansa and aircraft maker Airbus decreased by about 10 percent.

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 company HelloFresh were among a few gainers on Friday. Oil prices on both sides of the Atlantic have fallen by more than 5 percent.

“Things on the Covid front have escalated very quickly in the past 12 hours,” said Jim Reed, strategist at Deutsche Bank. Yesterday, he said the new variant “slowly started to attract increased interest but overnight started to dominate the markets”.

The B.1.1.529 Sars-Cov-2 variant, first identified in Botswana, is believed to have been behind an increase in Covid cases in South Africa over the past week and has alarmed global health officials with its apparent ability to evade vaccines and spread more quickly than delta variable.

The European Union and the United Kingdom have moved to impose travel restrictions on a handful of South African countries, while Israel has banned travelers from South Africa. The World Health Organization will hold an emergency meeting on Friday to discuss the new variant, which has been described as the most worrying strain to date by researchers.

Hong Kong’s benchmark Hang Seng Index fell more than 2.5 percent on concerns that the novel coronavirus strain could slow the global economic recovery and isolate the Asian financial hub. Two cases of the variant were confirmed in Hong Kong late Thursday.

“Look 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 on the tail of this Covid strain.”

Elsewhere in Asia, the benchmark Topix index in Tokyo fell 2 percent on Friday after UK banned direct flights From the six countries including South Africa until quarantine hotels were set up and operated.

Travel stocks were among the hardest hit, with Japan Airlines shares falling more than 6 percent, while Cathay Pacific, the national carrier of Hong Kong, fell 4 percent due to concerns about increased international travel restrictions.

Futures that track the Wall Street Standard & Poor’s 500 Index fell 1.9 percent in early European trade. US stocks will trade for fewer hours on Friday after the Thanksgiving holiday, something that could reduce trading volumes and increase volatility on US stock exchanges.

Government debt has risen as investors have turned to assets traditionally seen as lower risk. The benchmark 10-year US Treasury yield fell 0.12 percentage points to 1.53 percent on Friday. The yield on its German equivalent fell by 0.07 percentage points to minus 0.32 percent. The Japanese yen, which usually rises in times of mounting market turmoil, gained more than 1 percent against the dollar.

Meanwhile, oil prices were hit hard, as Brent crude, the global benchmark, fell more than 5 percent to $77.78 a barrel, and US West Texas Intermediate crude lost 6.7 percent at $73.13. The moves represent the biggest daily drop since July and follow this week’s move by the US, UK, India, South Korea, Japan and China to release strategic oil reserves, adding more supplies to the market.

“The sudden emergence 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 BVM Brokerage.

Industrial metals prices also declined, with copper down 2 percent to $9558 a ton, and aluminum down 2.1 percent at $2,658. Concerns about the real estate sector in China also affected this market.

Gold bucked the weak market trend, however, rising $18.5, or 1 percent, to $1,802 an ounce as investors looked for safe places to store cash.

“The price of gold should remain supported in this environment and the tapering issue should be reversed for now,” said Alexander Zumpvi, precious metals trader at German industrial group Heraeus.

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