Stocks sink, oil tanks as new virus variant sparks panic

LONDON – Stock markets and oil prices plunged Friday over fears of a new coronavirus variant that scientists warn could be more infectious than Delta and more resistant to vaccines, potentially dealing a heavy blow to the global economic recovery.

Haven investments the yen and Swiss franc rallied but the dollar floundered.

US crude oil prices tumbled over 12 percent, with the main international contract down nearly 11 percent.

“Crude oil prices have slumped sharply over concerns that this new mutation could add to the pressure on demand,” said CMC Markets analyst Michael Hewson.

OANDA analyst Craig Erlam told AFP that traders are worried about new restrictions and people’s behaviour this winter given the new variant.

“Even without severe restrictions, people will adopt more caution which will weigh on demand,” he said.

Share prices of airlines and tourism groups dived as countries put in new travel restrictions, while there were big losses also for energy groups.

“Stock markets fell sharply… as fears a new Covid variant will lead to fresh lockdowns, mobility restrictions and lower economic growth,” noted Neil Wilson, chief market analyst at Markets.com.

Europe’s main equity markets ended the day down, with the FTSE 100 shedding 3.6 percent and Paris and Frankfurt falling more than four percent, following sharp falls in Asia.

On Wall Street, the Dow slumped 2.8 percent in its shortened trading day following Thursday’s Thanksgiving holiday.

“It’s Black Friday today for the retailers, but it’s ‘Red Friday’ right now for the stock market,” said Patrick O’Hare at Briefing.com.

Justin Tang at United First Partners said that while the latest news was worrying, “the world has gone through this before” with the Delta variant, adding that governments were more adept at knowing how to deal with the situation.

“Mutations are expected and not something unknown,” he said.

Germany’s BioNTech said it was studying how well the coronavirus vaccine it developed with US drugs giant Pfizer protects against the new variant.

“We expect more data from the laboratory tests in two weeks at the latest. These data will provide more information about whether B.1.1.529 could be an escape variant that may require an adjustment of our vaccine if the variant spreads globally,” a BioNTech spokesperson said.

Belgium later reported the first case of the variant in Europe.

– Fed outlook –

Traders were also keeping a wary eye on the Federal Reserve as the US central bank considers its next moves to fight soaring global inflation, which is an additional threat to economic recovery.

Some officials at the bank have flagged a quicker pace of tapering the Fed’s vast bond-buying stimulus programme, with a hike in US interest rates coming possibly in the middle of next year.

“The increased openness to accelerating the taper pace likely reflects both somewhat higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets,” Goldman Sachs said in a note to clients.

However, Briefing.com’s O’Hare said the emergence of the new variant could change the view on the Fed’s move.

“The manner in which the B.1.1.529 variant evolves, though, could potentially change the market’s perspective on the matter,” he said.

“Certainly, in the heat of today’s headline moment, there will be added concern about the Fed making a policy mistake” if it accelerates the tapering of its stimulus programme.