New Covid variant stirs global markets, oil prices fall by 6%

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On October 28, 2021, registered nurse Savanah Wagstaff watched Aliza Burns, a nursing student at Brigham Young University in Idaho, treating a coronavirus in his isolation room at Madison Memorial Hospital in Rexburg, Idaho, USA COVID-19 positive patients.

Shannon Stapleton | Reuters

On Friday, after news that a severely mutated Covid-19 variant was discovered for the first time in South Africa, the global market fell into chaos.

The World Health Organization will meet on Friday to discuss the emergence of the B.1.1.529 variant. South African scientists claim that the variant contains more than 30 mutations in the spike protein, which is a viral component that binds to cells. This far surpasses the now dominant Delta variant, which itself is highly contagious.

Health officials said that many of these mutations are related to increased antibody resistance and may affect the variant’s behavior in terms of vaccines, treatment, and transmission, although the WHO said further investigations are needed to better understand its effects.

The Pan-European Stoxx 600 Index fell 2.6% in early European trading. Banking and travel stocks, as well as the oil and gas sector suffered heavy losses as oil prices plummeted.

The international benchmark Brent crude oil fell 5.3% to US$77.84 per barrel in early European trading, while US crude oil fell more than 6.5% to US$73.31 per barrel.

In the United States, the US stock index futures Dow Jones Industrial Average fell nearly 800 points at the opening, while the Asia-Pacific market fell sharply overnight. The Hong Kong Hang Seng Index and Japan’s Nikkei 225 both fell more than 2.5%.

At 4 am Eastern Time, the yield on the benchmark 10-year US Treasury note fell by more than 11 basis points to 1.5277%. The 30-year Treasury bond yield fell by 9 basis points to 1.8791%. The rate of return is inversely proportional to the price, and 1 basis point is equal to 0.01%. Spot gold rose by approximately US$19 to US$1,808 per troy ounce.

The variant has been detected in the Hong Kong quarantine hotel of a traveler from South Africa. It is reported that a person across the hall was also affected, and the remaining travellers were quarantined separately.

From noon on Friday to 4 am on Sunday, the British government banned departures from South Africa and Botswana, as well as Eswatini, Lesotho, Namibia and Zimbabwe, and banned departures from South Africa and Botswana. From then on, a 10-day quarantine period will be enforced for travelers from these countries.

Some analysts said that due to the reduced trading volume during the Thanksgiving holiday in the United States, market volatility may increase. The US market is closed on Thursday and will last until noon on Friday.

The central bank is more cautious

Geoffrey Yu, senior market strategist at the Bank of New York Mellon, said in an interview with CNBC’s “Squawk Box Europe” on Friday that some corners of the market may believe that the news of this new variant will give the Fed a reason to suspend its monetary policy. Although he does not necessarily agree with this view.

Yu said that even before the news of this latest variant appeared, the recent resurgence of Covid cases in Europe indicated that “we will still deal with this issue for some time, and there will be several rounds of risk aversion that will hit the market because of pandemic concerns. “

CNBC Pro’s stock selection and investment trends:

Emmanuel Cau, head of European equity strategy at Barclays, said that since many major stock markets are at or near historical highs, the pullback seems “logical.”

“We have recommended more barbell sector allocation and downward hedging at these levels, but we believe that resilient growth and patient central banks should continue to provide buffers in the medium term, while investors have dry powder to buy on dips,” Cau Represents Friday emails.

“The key is to figure out whether the current vaccine is still effective against these variants. Covid uncertainty may force the central bank to proceed with caution.”

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