IGI Logo

LONDON - U.S. stock index futures pointed to a slide at the post-Thanksgiving Wall Street open and oil hit two-month lows as fears of a possibly vaccine-resistant coronavirus variant sent investors scurrying to safe-haven assets.

Scientists say the variant, detected in South Africa, Botswana, Israel and Hong Kong, has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible.

Britain said it was the most significant variant to date and was one of several countries to impose travel restrictions on southern Africa.

The European Commission also said it wanted to consider suspending travel from countries where the new variant has been identified, though the World Health Organization (WHO) cautioned against hastily imposing such restrictions.

"This could be the moment that people look back on as derailing the economic recovery and rate rises but what we have is a big insertion of uncertainty rather than something material," said Peter Rutter, head of equities at Royal London Asset Management.

"The very fact we don't know is what's concerning the market."

The WHO is convening an experts' meeting on Friday to evaluate whether the new variant is a "variant of concern".

It will take a few weeks to understand the impact of the variant, a spokesperson said.

U.S. crude futures plunged 6.7% to $73.17 a barrel and Brent crude was down 5.86% to $77.43 on the possible hit to travel and demand for fuel. [O/R]

S&P 500 futures fell 1.8% and Dow futures slid 2.2%.

U.S. equity markets were shut on Thursday for Thanksgiving and close early on Friday.

Global shares fell 0.7% and were on course for their worst week since early October.

European stocks were 2.6% lower, on track for their worst day since September 2020. [.EU]

The pandemic playbooks were back out. Tourism-sensitive stocks such as plane engine maker Rolls Royce, easyJet and International Consolidated Airlines all saw double digit losses in Europe.

Malaysian rubber glove maker Supermax, which soared 1500% during the first wave of the pandemic, leapt 15%.

Germany's DAX lost 2.8% and Britain's FTSE 100 also fell 2.8%, to its lowest in more than a month.

MSCI's index of Asian shares outside Japan dropped 2.2%, its sharpest fall since August. Japan's Nikkei skidded 2.5%.

Giles Coghlan, chief currency analyst at brokerage HYCM, said the closure of the U.S. market for Thanksgiving had exacerbated moves.

"We need to see how transmissible this variant is, is it able to evade the vaccines - this is crucial," Coghlan said.

"I expect this story to drag on for a few days until scientists have a better understanding of it."

As investors dashed for safe-haven assets, the yen jumped more than 1% to 113.9 per dollar, having languished earlier this week at five-year lows.

The dollar fell 0.5% against an index of currencies and the euro rose 0.64% to $1.1278.

The single currency, however, fell to near 6-1/2 year lows against the Swiss franc at 1.044 francs per euro.

South Africa's rand fell more than 1% to a one-year low and its 2030 bond yield soared 19 basis points (bps). Bond yields move inversely to price.

Other bond markets strengthened, benefiting from their safe haven status. Ten-year Treasury yields fell 12 bps to 1.5226% and 30-year yields were down 9 bps to 1.8818%. [US/]

Germany's 10-year bond yield was down 7.5 bps at -0.32%, set for its biggest daily fall since March. [GVD/EUR]

Gold rose 1.3% to $1,810 an ounce.

The market swings come against a backdrop of already growing concern about COVID-19 outbreaks driving restrictions on movement and activity in Europe and beyond.

Markets had previously been upbeat about the strength of economic recovery, despite growing inflation fears.

"Going into year-end, investors may prefer to keep a bit more in safe havens and we also have to assess how it feeds into central bank risk assessments, even if this variant turns out not to be of huge concern," said Commerzbank rates strategist Rainer Guntermann.

"It's a reminder that the pandemic could pop up again at virtually any time."