Stocks, oil tumble on virus variant fears

Moves in Treasuries were sharp in Tokyo as yields quickly pulled back some of the week's gains.
Moves in Treasuries were sharp in Tokyo as yields quickly pulled back some of the week's gains.

Global stocks tumbled on Friday and oil fell below $US80 ($A112) a barrel after news of a possibly vaccine-resistant coronavirus variant sent investors scurrying to the safety of bonds, the yen and the Swiss franc.

Little is known of the variant, detected in South Africa, Botswana and Hong Kong, but scientists say it has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible.

British authorities think it is the most significant variant to date and have hurried to impose travel restrictions on southern Africa, as did Japan, the Czech Republic and Italy on Friday.

The European Union also said it aimed to halt air travel from the region.

"Markets have been quite complacent about the pandemic for a while, partly because economies have been able to withstand the impact of selective lockdown measures. But we can see from the new emergency brakes on air travel that there will be ramifications for the price of oil," said Chris Scicluna, head of economic research at Daiwa.

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

Global shares fell 0.8 per cent and were on course for their worst week since early October.

European stocks plunged 2.7 per cent, on track for their worst day since September 2020, with travel and leisure stocks particularly badly hit.

Germany's DAX sank three per cent and Britain's FTSE 100 fell 2.7 per cent to its lowest in more than a month.

MSCI's index of Asian shares outside Japan fell 2.2 per cent, its sharpest drop since August. Casino and beverage shares were hammered in Hong Kong, while travel stocks dropped in Sydney and Tokyo.

Japan's Nikkei skidded 2.5 per cent and S&P 500 futures were last down 1.8 per cent.

Giles Coghlan, chief currency analyst at HYCM, a brokerage, said the closure of the US market for the Thanksgiving holiday on Thursday 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."

Oil prices slid, with US crude futures down 5.7 per cent to $US73.96 ($A103.54) a barrel and Brent crude down 4.66 per cent to $US78.38 ($A109.72) amid fresh demand fears.

As investors dashed for safe-haven assets, the yen jumped more than one per cent to around 113 per dollar, having languished earlier this week at five-year lows.

The euro rose 0.4 per cent to $US1.1251 ($A1.5750), as safety rather than policy differentials drove trade.

The single currency, however, fell to near six-and-a-half year lows against the Swiss franc at 1.044 francs per euro.

"You shoot first and ask questions later when this sort of news erupts," said Ray Attrill, head of FX strategy at National Australia Bank in Sydney,.

South Africa's rand fell two per cent to a one-year low and its 2030 bond yield soared 25.5 basis points (bps). Bond yields move inversely to price.

Other bond markets strengthened, benefiting from their safe haven status. Ten-year Treasury yields fell 11 bps to 1.5277 per cent and 30-year yields were down 9 bps to 1.8777 per cent.

Germany's 10-year bond yield was down 6.2 bps at -0.31 per cent

Gold rose 0.7 per cent to $US1,800 ($A2,520) 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.

European countries have expanded COVID-19 booster vaccinations and tightened curbs. Slovakia announced a two-week lockdown, the Czech government will shut bars early and Germany crossed the threshold of 100,000 COVID-19-related deaths.

"I don't think there's any going back to the pre-COVID-19 world," said Mark Arnold, chief investment officer at Hyperion Asset Management in Brisbane.

"We're just going to get mutations through time and that's going to change the way people operate in the economy. That's just reality."

Australian Associated Press