NEW YORK – Stock markets plunged and oil prices fell Friday due to fears that a new coronavirus strain could infect more people than the Delta strain. It is also more resistant to vaccines and could cause a severe economic downturn.
Wall Street indices fell and the dollar crashed, causing the Dow to experience its largest drop in the past year. However, haven investments like the yen or Swiss franc saw a rebound.
Ross Mayfield, Baird’s investment strategy analyst, said that “it’s a one-track market today.” He pointed out fears that the new strain could be worse than Delta, which has slowed US growth, hiring, and employment in the third quarter.
He said that he believed the market’s reaction at the current level of uncertainty, particularly near the all-time highs, made sense.
US crude oil prices plunged by more than 13 percent. The main international contract lost almost 12 percent. CMC Markets analyst Michael Hewson said that the reason was “concerns about this new mutation could increase the demand pressure.”
Craig Erlam, OANDA’s chief economist, told AFP that traders are concerned about the new restrictions and people’s behavior this winter due to the new variant.
He said, “Even with no severe restrictions, people will be more cautious, which will weigh down on demand.”
Fears of this new variant have led many countries in Europe and Asia to ban or severely limit travel from southern Africa due to their fear.
The share prices of airlines and tourist groups fell, but there were large losses for energy groups.
Wall Street saw a 2.5% loss for Dow in the short-term session following Thursday’s Thanksgiving holiday.
Europe’s major equity markets finished the day lower, with the FTSE 100 losing 3.6 percent and Paris, Frankfurt and Frankfurt dropping more than four percent respectively, following sharp falls in Asia.
Briefing.com’s Patrick O’Hare stated that while it’s Black Friday for retailers today, it’s Red Friday for the stock market.
Justin Tang, United First Partners, stated that the latest news is worrying but that the world had been through similar situations before with the Delta variant. He also said that governments are more skilled at coping with such situations.
He said, “Mutations can be expected and are not an unknown.”
BioNTech in Germany said that it was examining how the coronavirus vaccine developed with Pfizer, the US drug giant, protects against the new variant.
Officials from the European Union met in an emergency meeting to discuss the new variant. They agreed to ask all 27 member countries to stop travel from southern Africa. This is the area where it was first discovered.
As the US central bank looks at its next steps to combat soaring global inflation, traders were also discussing what the new variant might mean for the Federal Reserve.
With an eye on ending the pandemic in mid-2019, the Fed is slowly reducing its stimulus to the economy. Although rate hikes could begin at that time, some officials are considering speeding up the process in order to prevent price rises.
Briefing.com’s O’Hare stated that the new variant poses a new problem.
He stated that “certainly, in the heat today’s headline moment there will be additional concern about the Fed making policy mistakes.”
Figures of importance
Dow down 2.5 percent
S&P 500: DOWN 2.3%
Nasdaq: Down 2.2 percent
FTSE 100: DOWN 3.6%
DAX: DOWN 4.2%
Paris: DOWN 4.8 Percent
EURO STOXX 50: A 4.7 Percent Drop
Nikkei 225: DOWN 2.5 percent
Hong Kong: Down 2.7 percent
Shanghai: DOWN 0.6%
West Texas Intermediate: 13.1 percent down
Brent North Sea crude: DOWN 11.5 percent
Dollar/yen: DOWN at 113.22 yen
Pound/dollar: UP at $1.33340
Euro/dollar: UP at 1.1311
Euro/pound: UP at 84.77pence