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Friday, December 3, 2021

Risky assets plummet as new COVID-19 variant raises fears they have headed for safe havens

The overnight headlines about the emergence of a new COVID-19 variant in South Africa seemed to scare investors as the risk-averse impulse drove global equities and US stock futures down, and havens such as US Treasuries and gold benefited from the outflow.

Asian equities outside Japan fell more than 2 percent, European and US stock futures fell sharply, and crude oil prices fell more than 5 percent.

“People are insecure about what that means. You shoot first and ask questions later when news like this comes out, ”said Ray Attrill, head of currency strategy at NAB in Sydney, Australia.

By about 4:30 a.m. New York time, the pan-European STOXX 600 fell about 2.5 percent in its worst session in more than a year, while the UK FTSE 100 fell 3.3 percent, the German DAX fell roughly by 3 percent, and French by about 3 percent. CAC 40 lost 3.5 percent.

The appetite for risk led investors to plunge into the seeming safety of US Treasuries, which sent the 10-year benchmark yield down nearly 10 basis points. The yield on bonds changes inversely with prices. The spot price of gold, a traditional safe-haven asset, rose nearly one percent.

Known for their sharp price swings, cryptocurrencies fell, with Bitcoin dropping more than 6 percent and Ethereum dropping about 10 percent.

Wall Street
Edward Curran (left) works with fellow traders on the New York Stock Exchange November 2, 2021. (Richard Drew / AP Photo)

While low liquidity following Thursday’s US Thanksgiving holiday likely exacerbated the price action, there is no doubt that the sudden headlines about a new option have caught the markets by surprise.

Little is known about this variant, found in South Africa, Botswana and Hong Kong, but South African scientists say it has an unusual combination of mutations and could avoid immune responses or make it more transmissible.

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“This option is a new risk for the markets. We cannot say how much he can avoid getting vaccinated, ”said Takashi Hiroki, chief strategist at Monex in Tokyo, Japan.

Following this news, the European Union authorities are seeking to stop air travel from the South African region. Amid growing concerns over a new variant of COVID-19 found in South Africa, EU Commission Chief Ursula von der Leyen said Friday.

“The Commission will propose, in close cooperation with Member States, to activate the emergency brake to stop air traffic from the South African region due to option B.1.1.529 of concern,” said Ursula von der Layen, head of the EU Commission. tweet on friday.

She added that the executive committee will recommend to all 27 EU member states to implement this measure and hopes that the Council of Europe will give the green light as soon as possible.

The UK has temporarily banned flights from South Africa, Namibia, Botswana, Zimbabwe, Lesotho and Eswatini since Friday and has asked returning British travelers from these destinations to quarantine.

The World Health Organization technical group is due to meet on Friday to discuss the new option at an urgent meeting requested by South Africa.

COVID-19 is a disease caused by the CCP (Chinese Communist Party) virus.

Mimi Nguyen Lee and Reuters contributed to this report.

Tom Ozimek

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Tom Ozimek has extensive experience in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he has ever heard is from Roy Peter Clarke: “Hit your target” and “leave the best for last.”

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