(Bloomberg) — A post-Thanksgiving selloff spread across global markets from stocks to commodities, and haven assets rallied, amid fears a new coronavirus variant identified in South Africa may spark fresh outbreaks and scuttle a fragile economic recovery.
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Futures on the S&P 500 Index and the Dow Jones Industrial Average slumped the most since September, as U.S. markets were set to return after the holiday. Europe’s equity benchmark fell the most since July. Ten-year Treasury yields shed 10 basis points while the Japanese yen jumped the most since investors’ March 2020 rush for safety. Crude oil to emerging markets completed this picture of mayhem.
The World Health Organization and scientists in South Africa are studying the recently identified variant, which has been described as very different to previous versions and of serious concern. The European Union, U.K., Singapore and Israel moved to halt travel from South Africa and some neighboring countries. Hong Kong confirmed two cases of the strain.
“Investors are worried about the growing possibility of a new series of lockdowns, which could curb the recovery,” Carlo Alberto De Casa, an external market analyst for Kinesis Money, wrote in emailed comments. “Central banks could be forced to review their strategies and exit plans from quantitative easing if the scenario is worsening again.”
The detection of the strain comes on top of concerns in markets about high inflation and the prospect of quicker exit from ultra-loose monetary settings. Global shares are up about 16% this year, weathering a plethora of risks after investors poured almost $900 billion into equity exchange-traded and long-only funds in 2021 — topping the combined total from the past 19 years.
On Friday, traders rushed to cut back their bets on rate hikes. Money markets now price less than a 10-basis-point hike by the Bank of England next month, compared with 35 basis points projected less than a month ago. They expect seven basis points of tightening by the European Central Bank by December 2022 as against nine basis points seen Thursday.
Treasuries rallied across the board, with the belly of the curve witnessing the biggest yield slumps. The five-year rate shed 13 basis points. Bond yields narrowed in the U.K., Germany and Italy also.
The yen emerged as the main haven currency Friday, with the dollar trading little changed. A gain for the euro, the biggest component of the Bloomberg Dollar Spot Index, also curbed the greenback.
MSCI Inc.’s Asia-Pacific equity gauge slid to the lowest since early October, with Japan and Hong Kong underperforming and travel shares among the biggest decliners. U.S. and European futures fell and the 10-year Treasury yield dropped to 1.55%.
Some of the worst-hit assets were in emerging markets. The currency of South Africa, where the virus strain was identified, sank 2.3% and the Mexican peso fell by a similar degree. The MSCI EM Currency Index fell to a six-week low.
Crude oil futures in New York dropped as much as 6.4% to trade below $74 per barrel. Copper, nickel and aluminum each fell at least 2% in London trading.
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Here are some key events this week:
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 fell 2.8% as of 8:53 a.m. London time
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Futures on the S&P 500 fell 1.8%
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Futures on the Nasdaq 100 fell 1%
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Futures on the Dow Jones Industrial Average fell 2.2%
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The MSCI Asia Pacific Index fell 1.8%
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The MSCI Emerging Markets Index fell 2%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro rose 0.4% to $1.1254
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The Japanese yen rose 1% to 114.22 per dollar
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The offshore yuan fell 0.1% to 6.3941 per dollar
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The British pound fell 0.1% to $1.3304
Bonds
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The yield on 10-year Treasuries declined 10 basis points to 1.53%
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Germany’s 10-year yield declined six basis points to -0.31%
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Britain’s 10-year yield declined 12 basis points to 0.85%
Commodities
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Brent crude fell 4.5% to $78.53 a barrel
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Spot gold rose 0.8% to $1,802.89 an ounce
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