'Big shock': Stocks plunge amid fears over new COVID variant - Financial Post

Jumat, 26 November 2021

'Big shock': Stocks plunge amid fears over new COVID variant - Financial Post

Dow falls 900 points

Author of the article:

Bloomberg News

Srinivasan Sivabalan

A trader works on the floor of the New York Stock Exchange. Photo by Spencer Platt/Getty Images

U.S. stocks slid as a post-Thanksgiving selloff spread across global markets amid fears a new coronavirus variant identified in South Africa could spark fresh outbreaks and scuttle a fragile economic recovery. Haven assets surged.

Equity benchmarks dropped across the board, with cyclicals and small-caps taking the brunt of the selling. The S&P 500 Index extended declines falling more than 2% while the Russell 2000 sank more than 4 per cent. Travel and leisure stocks tumbled, while stay-at-home shares gained. That helped ease losses in the Nasdaq 100, which was still down 1.8 per cent. Oil tumbled through US$70 a barrel in New York for the first time since late September.

At 10:06 a.m. ET, the Dow Jones Industrial Average was down 906.49 points, or 2.53 per cent, at 34,897.89, tracking its worst day since late October 2020.

The S&P 500 was down 86.05 points, or 1.83 per cent, at 4,615.41 and the Nasdaq Composite was down 214.71 points, or 1.36 per cent, at 15,630.52.

Canada’s main stock index was on course for its biggest fall since late January on Friday, dragged down by a 6 per cent drop in energy stocks as fears over a possibly vaccine-resistant coronavirus variant sent oil prices lower.

At 9:44 a.m. ET (14:44 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was down 365.66 points, or 1.69 per cent, at 21,247.52.

Treasuries jumped on haven bids, sending the 10-year yield down as much as 14 basis points, the most since March 2020, while traders pushed back bets on the Federal Reserve hiking rates. The Japanese yen emerged as the main haven currency of the day, with the dollar falling.

The World Health Organization and scientists in South Africa were said to be working “at lightning speed” to ascertain how quickly the B.1.1.529 variant can spread and whether it’s resistant to vaccines. The new threat adds to the wall of worry investors are already contending with in the form of elevated inflation, monetary tightening and slowing growth.

“This is not trivial,” said Jay Hatfield, chief executive and founder of Infrastructure Capital Management. “So it makes sense for people to rebalance because there’s tons of uncertainty and that’s never good for buying stocks.”

Carnival Corp. and Royal Caribbean Cruises Ltd. lost at least 9 per cent each while United Airlines Holdings Inc. dropped 10 per cent. Zoom Video Communications Inc. and Peloton Interactive Inc. were up at least 5 per cent.

“It’s terrible news,” Ipek Ozkardeskaya, a senior analyst at Swissquote, said in emailed comments. “The new COVID variant could hit the economic recovery, but this time, the central banks won’t have enough margin to act. They can’t fight inflation and boost growth at the same time. They have to choose.”

Europe’s equity benchmark headed for the biggest drop in 13 months. Ten-year Treasury yields shed nine basis points while the Japanese yen was poised for the biggest gain since investors’ March 2020 rush for safety. Crude oil to emerging markets completed this picture of mayhem.

“This is a big shock for people waking up (and) seeing the news,” said Carl Dooley, the head of EMEA trading at Cowen. “Uncertainty and fear will remain high and maybe we aren’t going back to new highs straight away.”

Global travel stocks were in particular focus after the European Union, U.K., Israel, and Singapore placed emergency curbs on passengers from South Africa and the surrounding region. British Airways parent IAG SA tumbled as much as 21 per cent in London. Carnival Corp. and Royal Caribbean Cruises Ltd. lost 10 per cent each in New York premarket session. Stay-at-home stocks such as Zoom Video Communications Inc. jumped in the early trading.

The selloff comes after global markets adopted a Jekyll-and-Hyde posture for months, with equities rallying to newer records even as concerns intensified over a toxic combination of high inflation and slower growth. Investors poured almost US$900 billion into equity exchange-traded and long-only funds in 2021 — exceeding the combined total from the past 19 years.

“The problem is that the market has gone up a lot this year,” Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management, said in emailed comments. “Valuations are high and given the uncertainties, the market sells first and asks questions later.”

Rate wagers cut

Traders pushed back the expected timing of a first 25-basis-point rate increase by the Federal Reserve to September from June, while briefly pricing out any more hikes unit 2023.

They also bet on less than a 10-basis-point hike by the Bank of England next month, compared with 35 basis points projected a month ago. They called for seven basis points of tightening by the European Central Bank by December 2022 as against nine basis points seen Thursday.

The yen and Swiss franc found bids from safety-conscious traders, while the dollar posted a modest loss. 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 gauges dropping at least 2 per cent each.

Some of the worst-hit assets were in emerging markets. The currency of South Africa, where the virus strain was identified, sank 1.9 per cent 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 7.4 per cent to briefly trade below $73 per barrel. Copper, nickel and aluminum each declined at least 3 per cent in London trading.

While the selling continued unabated, some investors said it’s important not to get carried away by short-term jitters.

“Markets have had a very strong run over the last 12 months and so it is no surprise to see a reaction like this,” said Dan Boardman-Weston, CIO at BRI Wealth Management. “If this is going to take the world backward from a Covid perspective, then it’s likely that inflation will abate and monetary policy will stay looser for a long time which is likely to be a positive for markets in the medium term.”

Some of the main moves in markets:

Stocks

The S&P 500 fell 2.2% as of 11:16 a.m. New York time
The Nasdaq 100 fell 1.8%
The Dow Jones Industrial Average fell 2.7%
The Stoxx Europe 600 fell 3.5%The MSCI World index fell 2.2%

Currencies

The Bloomberg Dollar Spot Index fell 0.3%
The euro rose 1% to US$1.1318
The British pound was little changed at US$1.3330
The Japanese yen rose 1.8% to US113.24 per dollar

Bonds

The yield on 10-year Treasuries declined 15 basis points to 1.48%
Germany’s 10-year yield declined nine basis points to -0.34%
Britain’s 10-year yield declined 15 basis points to 0.81%

Commodities

West Texas Intermediate crude fell 12% to US$69.22 a barrel
Gold futures rose 0.7% to US$1,800.30 an ounce

Bloomberg.com

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2021-11-26 16:30:00Z
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Jumat, 26 November 2021