EUROPEAN MID-DAY BRIEFING – Stocks, oil drop over concerns over new variant of Covid-19
European stocks fell after South Africa sounded the alarm on a new strain of rapidly spreading coronavirus, raising concerns over the potential for new travel restrictions or other brakes that could limit economic activity .
The South African government said Thursday it was considering further public health restrictions to contain the new variant, dubbed B. 1.1.529. Scientists say it has a high number of mutations that can make it more transmissible and allow it to escape some of the immune responses triggered by a previous infection or vaccination.
The variant was detected in a South African traveler to Hong Kong. The South African rand weakened sharply against the dollar, with $ 1 buying around R16.3.
âEveryone seems to be panicking about this new variant that is popping up from South Africa,â said Rob Carnell, research manager and chief economist for the Asia-Pacific region at ING.
It was not yet clear whether the new strain would prove to be more infectious or deadly than the Delta variant, but investors were concerned about potential travel restrictions, Mr Carnell said, adding that in a scenario where current vaccines were ineffective, larger blockages may be necessary.
“There are probably not a lot of people active in the markets right now. It could cause bigger moves than you might have otherwise imagined,” he added.
Travel documents were among the biggest losers. Japan Airlines, rival ANA Holdings and Australia’s Qantas Airways fell between 4.5% and 6.5%. The Japanese yen, which generally strengthens during times of increasing market stress, appreciated against the dollar.
“For now, Covid is back on the table,” said Takeo Kamai, head of enforcement services at CLSA in Tokyo. Although Japan has no confirmed cases linked to the new variant, investors feared it might push back the government’s plans for a gradual reopening of the economy, Kamai said. Tokyo recently said it would allow short-term business travelers.
Tech stocks also wilted after Bloomberg reported that China asked Didi Global to develop a delisting plan in the United States. suggested list in Hong Kong.
Data at a glance: As new infections in the eurozone have reached record levels, vaccinations have driven a wedge between infections, hospitalizations and deaths, and this recent increase in cases is not expected to derail the recovery, a said Citi.
Indeed, the link between the intensity of the pandemic and the mobility of people has diminished, as has the link between mobility and GDP, Citi economists said.
Vaccinations will likely be part of the solution, but closures and luck might also be needed, Citi said. Depending on whether or not those vaccinated are included in blockages, Citi estimates that the weekly impact on GDP would be between 0.2% and 0.5% of quarterly GDP, up from 1% in previous blockages.
Stock futures collapsed as global markets collapsed, after scientists detected a new variant of COVID in South Africa that could be behind a recent dramatic spike in cases.
Investors are returning from the Thanksgiving break to a cut short session for US markets, which often comes with lower volumes as traders often wait until Monday to return.
There is no economic data on the calendar for Friday. But the week had been simmering concerns about the increase in COVID cases in Europe and the new restrictions.
Fear of a new variant eclipsed Black Friday shopping day, which focuses on retailers as consumers shop for bargains.
The recent appreciation of the US dollar has gone too far, DZ Bank said. The euro, which has fallen sharply against the dollar recently, is expected to recover over the next six months, he said, and maintains a one-year EUR / USD forecast at 1.18.
Inflation rates for 2021 will be a “thing of the past” by mid-2022, so the US Federal Reserve is unlikely to take the aggressive approach markets are now expecting.
Meanwhile, the European Central Bank will be in the middle of its own reduction program, said Sonja Marten, analyst at DZ Bank. Robust growth rates in the euro area should allow the euro to gain ground, she said.
It’s hard to see the Turkish lira stabilize at a time when markets anticipate the Fed may start raising interest rates next year and reassess global rate expectations, said Magdalena Polan, chief economist for emerging market economies in Central Europe and the Middle East. at PGIM Fixed Income.
“It’s even more difficult than in 2020, at a time when money is relatively easy,” she said, adding that now the country’s authorities are going against the Fed and a slightly weaker Chinese growth.
The economist said it was difficult to see how Turkish policymakers would come out of this given their reluctance to engage in more orthodox policies, but eventually they will have to take action.
NN Investment Partners said it opened a moderate overweight in German Bunds, while maintaining its underweight in US Treasuries.
This change reflects his view that the likelihood that the Fed will live up to market expectations has increased and that expectations for the ECB appear even more strained than before, said Maarten-Jan Bakkum, senior markets strategist. emerging at NN IP.
“Given the headlines about potential lockdowns in Europe and the subsequent cut in European rates, we have found it prudent to take a less overall directional view on short-term global rates,” he said.
German 10-year Bund yields could reach 0% next year, but that level should generate demand, pushing yields down quickly, Metzler said. 10-year US Treasury yields could reach and also rise slightly above 2%, he added.
“One thing remains clear for government bonds on both sides of the Atlantic: the fear of a drain on vital liquidity is unreasonable,” Metzler said.
For the already very hesitant central banks, the pandemic situation still tense should provide sufficient arguments to move only marginally or, in case of doubt, not at all, estimated Metzler. Currently, concerns over the surge in Covid-19 cases are fueling demand for government bonds.
Oil prices have remained firmly in the red following South Africa’s warning of a new, highly transmissible strain of the coronavirus. Of course, one factor to consider is the reduction in trading volumes after the US holiday Thursday and before the weekend. Lower volumes can often amplify the movements of transactions that take place, meaning that asset prices can be more volatile.
Helge Andre Martinsen of DNB Markets said that although the UK and Singapore have already halted travel from southern African countries, the EU will soon decide to do so.
Copper prices collapsed amid concerns that a new variant of the coronavirus could affect economic growth and undermine demand for raw materials. The metal, which is used in everything from construction to consumer electronics, is considered a barometer of global growth.
“The only thing we can be sure of is the volatility on the approach [the] end of the month with more and more unanswered questions, âsaid Malcolm Freeman, CEO of Kingdom Futures.
âMost important probably being that we are heading towards a second global foreclosure and if so, global markets will be in turmoil again,â he said.
Gold prices have risen as concerns over a new wave of Covid-19 risk assets hit and sent investors to havens. South Africa’s warning that it has detected a new, highly mutated variant of the coronavirus has raised concerns about new blockages and restrictions on mobility, which could again affect countries’ economic growth.
“As the stock markets weaken, the Bund and gold are showing big gains,” said Alexander Zumpfe, precious metals trader at Heraeus. “The uncertainty over the possible consequences of the new variant of the virus is a clear reminder to markets that this pandemic is not yet over.”
New variant of Covid-19 in southern Africa leads to wave of travel restrictions
JOHANNESBURG – Dozens of countries restricted travel to and from South Africa and neighboring countries on Friday, hoping to contain a new, rapidly spreading variant of the coronavirus that scientists say could be more contagious and could make the current harvest of Covid-19 vaccines less efficient.
Experts from the World Health Organization were due to meet later Friday to decide whether to declare the new strain, currently known as B.1.1.529, a “variant of concern”. WHO uses this label for viral strains that have been shown to be more contagious, cause more serious disease, or decrease the effectiveness of public health measures, tests, treatments or vaccines.
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As part of the deal, shareholders of the UK automation software company will receive 1,250 pence in cash for each share held, up from 1,125 pence when the company first agreed to a Vista buyout on September 28. . The offer price is a 50% premium. at the closing price of the Blue Prism share of 832 pence on August 27, the day before the start of the offer period.
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November 26, 2021 06:30 ET (11:30 GMT)
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