Stocks suffered their biggest drop in three months in Asia on Friday, and oil fell after the detection of a new, possibly vaccine-resistant variant of the coronavirus that prompted investors to rush to the safety of bonds, du yen and dollar. The MSCI Asian non-Japan equity index fell 2%, its biggest drop since August. Casino and beverage stocks were hammered in Hong Kong, while travel stocks fell in Sydney and Tokyo.
Japan’s Nikkei slipped 3% and US crude oil futures fell around 3% on new demand fears. S&P 500 futures were last down 1% and Euro STOXX 50 futures were down 2%.
Little is known about the variant, detected in South Africa, Botswana and Hong Kong, but scientists have said it exhibits an unusual combination of mutations and may be able to evade immune responses or to make it more transmissible. British officials believe it is the most important variant yet, fear it may be vaccine-resistant and rushed to impose travel restrictions, as Japan did on Friday.
“You shoot first and ask questions later when this kind of news breaks out,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank in Sydney, as traders were baffled. Bets on rate hikes also fell slightly as federal funds futures rallied and two-year Treasury yields fell 6 basis points, the biggest drop since March 2020.
The South African rand fell more than 1.5% to its lowest in a year on Friday, and the risk-sensitive Australian and New Zealand dollars each fell to three-month lows. Australia also hinted at possible border closures in response to the new variant.
“Markets are anticipating the risk of another global wave of infections here if vaccines are ineffective,” said Moh Siong Sim, currency analyst at the Bank of Singapore. “Hopes of reopening may be dashed.”
NOT NORMAL? The selling pressure comes amid already growing concern over COVID-19 outbreaks resulting in restrictions on movement and activity in Europe and beyond.
European countries have extended COVID-19 booster vaccinations and tightened restrictions. Slovakia has announced a two-week lockdown, the Czech government will close bars earlier and Germany has crossed the threshold of 100,000 COVID-19-related deaths. “I don’t think any will return to the pre-COVID-19 world,” said Mark Arnold, chief investment officer at Hyperion Asset Management in Brisbane.
“We’re just going to be mutating over time and it’s going to change the way people operate in the economy. It’s just the reality.” Global stocks are on track for their worst week since early October. Dow Jones futures fell 1%, while FTSE futures fell 1.9%.
In currency markets, the yen jumped about 0.6% to 114.67 per dollar and the Aussie lost 0.6% for the last time to $ 0.7141. The euro edged up 0.2% to $ 1.1226 as security rather than policy spreads boosted trade in Asia. Movements in Treasuries were also marked in the longer term, with 10-year Treasury yields falling eight basis points to 1.5618% and 30-year yields falling 7 basis points. 1.8963% base.
While that leaves yields in recent ranges, the heat has come out of bets on the pace of rate hikes, and the December 2022 federal funds futures contract was up about 9 basis points.
(This story was not edited by Devdiscourse staff and is auto-generated from a syndicated feed.)