London – Stock markets and oil prices plunged on 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.
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.
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Europe’s main equity markets were down at least three percent approaching the half-way mark following sharp falls in Asia.
Crude oil prices slumped between six and seven percent.
“It’s a scary headline” about the virus, so it may have caused a knee-jerk reaction, said Kyle Rodda at IG Markets.
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.
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The World Health Organisation cautioned against imposing new travel restrictions over the new Covid-19 variant B.1.1.529.
It added that it would take “a few weeks” for researchers to understand the impact of the variant detected in South Africa.
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.
Fed outlook
Traders were keeping a wary eye also 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.
Key figures around 1115 GMT
London – FTSE 100: DOWN 3.0 percent at 7,092.59 points
Frankfurt – DAX: DOWN 2.9 percent at 15,455.75
Paris – CAC 40: DOWN 3.7 percent at 6,811.37
EURO STOXX 50: DOWN 3.3 percent at 4,151.50
Tokyo – Nikkei 225: DOWN 2.5 percent at 28,751.62 (close)
Hong Kong – Hang Seng Index: DOWN 2.7 percent at 24,080.52 (close)
Shanghai – Composite: DOWN 0.6 percent at 3,564.09 (close)
New York – Dow: Closed for holiday
West Texas Intermediate: DOWN 6.9 percent to $73.00
Brent North Sea crude: DOWN 5.9 percent at $77.36
Dollar/yen: DOWN at 113.98 yen from 115.36 yen at 2100 GMT
Pound/dollar: UP at $1.3332 from $1.3325
Euro/dollar: UP at $1.1283 from $1.1213
Euro/pound: UP at 84.61 pence from 84.16 pence
