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Equities, oil prices, U.S. Treasury yields all drop on COVID variant fears

11/26/2021 | 01:52pm EST
FILE PHOTO: The German share price index DAX graph at the stock exchange in Frankfurt

WASHINGTON/LONDON (Reuters) - Shares tumbled on Wall Street on Friday as they reopened after Thanksgiving, while European stocks saw their biggest sell-off in 17 months and oil prices plunged by $10 per barrel as fears over a new coronavirus variant sent investors scurrying to safe-haven assets.

The World Health Organization (WHO) on Friday designated a new COVID-19 variant detected in South Africa with a large number of mutations as being "of concern," the fifth variant to be given the designation.

Unofficially, the Dow Jones Industrial Average closed down 2.53% at 34,899.34 in its largest percentage drop in more than a year. The S&P 500 lost 2.27%, its worst one-day drop since Feb. 25, and the Nasdaq Composite dropped 2.23%, the biggest one-day route in two months.

U.S. markets closed early on Friday after being shut all day on Thursday for the Thanksgiving holiday.

The benchmark STOXX 600 index ended 3.7% lower on the day, leaving it down 4.5% for the week. The volatility gauge for the main stock market hit its highest in nearly 10 months.

Companies that had benefited from an easing of COVID-related restrictions this year, including AMC Entertainment, plane engine maker Rolls Royce, easyJet, United Airlines and Carnival Corp all fell.

Retailers dropped as Black Friday, the start of the holiday shopping season, kicked off as the new variant fuelled concerns about low store traffic and inventory issues.

In Europe, the travel and leisure index plummeted 8.8% in its worst day since the COVID-19 shock sell-off in March 2020.

"Bottom line is this is showing that COVID is still the investor narrative, a lot of today's movement is driven by the South African variant," said Greg Bassuk, chief executive officer of AXS Investments in Port Chester, New York.

"We have been talking about four or five factors that have been driving the last couple of months' activity - inflation fears, some economic data, Fed policy - but what we have seen over the last year is that big developments with respect to COVID really have ended up eclipsing some of those other factors by a substantial degree and that is what is driving today's market activity."

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

Britain said the new variant 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 WHO cautioned against hastily imposing such restrictions.

Global shares fell 1.81%, their biggest down day in more than a year. France's CAC 40 shed 4.8%. The UK's FTSE 100 dropped 3.6%, while Germany's DAX fell 4.2% and Spain's IBEX lost 5.0%.

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

MSCI's index of Asian shares outside Japan dropped 2.44%, its sharpest fall since late July.

In commodities, oil prices plunged. Gold prices reversed earlier gains seen amid the move away from riskier assets.

U.S. crude was last down 12%, at $69.02 per barrel by 1:21 p.m. EST (1812 GMT). Brent crude dropped 10.5% to $73.59.

Spot gold prices were down 0.09%.

As investors dashed for safe-haven assets, the Japanese yen strengthened 1.87% versus the greenback, while sterling was last trading at $1.3331, up 0.08% on the day.

The dollar index fell 0.757%, with the euro up 1% to $1.1318.

U.S. Treasury debt yields posted their sharpest drop since the pandemic began. Treasuries benchmark 10-year notes last rose to yield 1.4867%. The 2-year note last rose to yield 0.4941%, from 0.644%. [US/]

"A flight to safety is underway with the 10-year U.S. Treasury yield down," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "The proximate cause of the sell-off is yesterday's announcement of a new COVID-19 variant in South Africa, which investors fear could weigh on economic growth."

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.

(Reporting by Chris Prentice; Editing by Susan Fenton)

By Chris Prentice and Carolyn Cohn

ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AMC ENTERTAINMENT HOLDINGS, INC. -0.44% 20.57 Delayed Quote.-24.38%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.17% 0.63109 Delayed Quote.-0.50%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.14% 0.7205 Delayed Quote.-0.76%
BLACKROCK, INC. -2.19% 848.6 Delayed Quote.-7.31%
BRITISH POUND / EURO (GBP/EUR) -0.02% 1.19796 Delayed Quote.0.61%
BRITISH POUND / JAPANESE YEN (GBP/JPY) 0.16% 156.542 Delayed Quote.0.47%
BRITISH POUND / SWISS FRANC (GBP/CHF) 0.02% 1.2504 Delayed Quote.1.23%
BRITISH POUND / US DOLLAR (GBP/USD) 0.00% 1.3675 Delayed Quote.1.06%
CAC 40 -0.81% 7143 Real-time Quote.-0.14%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.02% 0.698573 Delayed Quote.0.23%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) 0.02% 0.72915 Delayed Quote.0.81%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.01% 0.7972 Delayed Quote.0.64%
CARNIVAL CORPORATION & PLC 0.22% 22.95 Delayed Quote.14.07%
CHINESE YUAN RENMINBI / SWISS FRANC (CNY/CHF) 0.19% 0.14413 Delayed Quote.0.19%
DANISH KRONE / SWISS FRANC (DKK/CHF) 0.05% 13.979 Delayed Quote.0.48%
DAX -0.93% 15883.24 Delayed Quote.-0.01%
DJ INDUSTRIAL -0.56% 35911.81 Delayed Quote.-1.17%
DOW JONES AFRICA TITANS 50 INDEX -0.31% 554.06 Delayed Quote.3.56%
DOW JONES FXCM DOLLAR INDEX 0.04% 12137.04 Delayed Quote.-0.25%
DOW JONES SOUTH AFRICA(ZAR) 0.00% 2038.57 Delayed Quote.3.61%
EASYJET PLC 0.09% 635.6 Delayed Quote.14.32%
EURO / JAPANESE YEN (EUR/JPY) 0.17% 130.661 Delayed Quote.-0.36%
EURO / US DOLLAR (EUR/USD) 0.04% 1.1414 Delayed Quote.0.75%
FTSE 100 -0.28% 7542.95 Delayed Quote.2.15%
GOLD 0.14% 1818.94 Delayed Quote.-0.69%
IBEX 35 -0.12% 8806.6 Delayed Quote.1.07%
INDIAN RUPEE / EURO (INR/EUR) -0.24% 0.011781 Delayed Quote.0.14%
INDIAN RUPEE / SWISS FRANC (INR/CHF) -0.18% 0.0123 Delayed Quote.0.60%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.24% 0.013453 Delayed Quote.0.42%
JAPANESE YEN / SWISS FRANC (JPY/CHF) -0.01% 0.798 Delayed Quote.0.93%
LONDON BRENT OIL -0.12% 86.42 Delayed Quote.7.95%
NASDAQ COMP. 0.59% 14893.75271 Real-time Quote.-4.80%
NEW ZEALAND DOLLAR / JAPANESE YEN (NZD/JPY) 0.08% 77.901 Delayed Quote.-0.55%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.03% 0.6804 Delayed Quote.-0.57%
NIKKEI 225 0.74% 28333.52 Real-time Quote.-2.32%
RUSSIAN ROUBLE / SWISS FRANC (RUB/CHF) 0.45% 0.01201 Delayed Quote.-1.54%
S&P 500 0.08% 4662.85 Delayed Quote.-2.17%
S&P AFRICA 40 INDEX -0.06% 182.22 Delayed Quote.4.35%
S&P GSCI BRENT CRUDE INDEX 1.02% 726.3838 Delayed Quote.8.63%
STOXX EUROPE 600 NR -1.01% 1084.11 Delayed Quote.-1.33%
SUPERMAX CORPORATION BERHAD -2.84% 1.37 End-of-day quote.-6.80%
SWEDISH KRONA / SWISS FRANC (SEK/CHF) -0.35% 0.101358 Delayed Quote.0.49%
UNITED AIRLINES HOLDINGS, INC. -2.97% 46.74 Delayed Quote.6.76%
US DOLLAR / EURO (USD/EUR) -0.03% 0.87601 Delayed Quote.-0.75%
US DOLLAR / JAPANESE YEN (USD/JPY) 0.15% 114.467 Delayed Quote.-0.83%
WTI -0.08% 84.374 Delayed Quote.8.53%
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