Stocks and oil prices were plunging around the world Friday as fears surrounding a new, heavily mutated variant of Covid-19 slammed markets and shook investor confidence.
Trading volumes were low due to the extended Thanksgiving holiday in the U.S., which could be contributing to volatility.
Futures for the Dow Jones Industrial Average indicated an open more than 800 points, or around 2.5%, lower, after the index edged down 9 points Wednesday to close at 35,804. Futures for the S&P 500 and Nasdaq also fell sharply.
U.S. stock and bond markets were closed Thursday for the Thanksgiving holiday and will trade on truncated hours Friday.
Concerns surrounding a new, heavily mutated variant of Covid-19 identified in South Africa have rocked markets. Fears over the pandemic largely had faded from investors’ minds in recent months, but have come back into focus in the last week amid a surge of cases in Europe and the latest news on this variant.
Stocks were sharply lower, oil prices have fallen almost 5%—with futures for international benchmark Brent crude down to below $77 per barrel—and bond yields have slipped. The yield on the benchmark 10-year U.S. Treasury note was down to 1.53% after closing at 1.63% Wednesday.
The variant was first identified in Botswana. South Africa’s health minister has said the B.1.1.529 Covid-19 variant is “of serious concern” and a virologist at Imperial College’s Department of Infectious Disease called its spike profile “horrific.” The variant’s spike protein is the target of most vaccines.
Only around 60 cases have been identified so far in South Africa, as well as Hong Kong and Botswana.
The World Health Organization is set to meet Friday to decide if B.1.1.529 is a variant of interest or variant of concern. Worries around the variant have already led to the beginning of new travel restrictions, with the U.K. adding South Africa and five other countries in the region on its “red” list.
“A lot of eyes will be on how severe it is and whether it completely evades vaccines. At this stage very little is known,” said Jim Reid, a strategist at Deutsche Bank. “Suffice to say at this stage no one in markets will have any idea which way this will go.”
Michael Hewson, an analyst at broker CMC Markets, added that “due to the thin liquidity levels in Asia trading as a consequence of the U.S. holiday the reaction does appear to be outsized, with a surge into bonds, sending yields plunging, and gold higher.”
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