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‘A black Black Friday’: Here’s what analysts are saying as global stocks plunge on fears about new COVID variant

US stocks look set to plunge when markets open after a new, highly mutated COVID variant was identified in South Africa. ...
A trader works during afternoon trading on the floor of the New York Stock Exchange
Global stocks plunged Friday.

  • Global stocks are cratering after a new, highly mutated COVID variant was discovered in South Africa.
  • Analysts said volatility would be worsened by poor liquidity, with US trading limited by Thanksgiving.
  • Another said investors are simply taking no chance as they wait for more details about the new variant.

Global stocks are being hammered on Friday after a new, heavily mutated COVID variant was identified in South Africa, causing countries to limit travel and sparking fears of another wave of cases.

Scientists are racing to find out whether the new variant, called B.1.1.529, is more infectious or deadly than previous strains. South Africa has confirmed around 100 cases, but it's already been found as far away as Hong Kong.

Global investors are not liking what they're seeing. S&P 500 futures were last down 1.73%, suggesting stocks will plunge at the start of a Thanksgiving-shortened trading day. Dow Jones futures dropped 2.16%.

In Europe, the continent-wide Stoxx 600 tumbled 2.57% in morning trading after Tokyo's Nikkei 225 dropped 2.53% overnight. Oil prices have cratered more than 5% as investors weigh the chances of more lockdowns and travel bans.

Commerzbank analysts called it a "black Black Friday." Here's what others are saying as the new variant shakes markets.

Poor liquidity is driving volatility

"US equity futures shot lower from the moment they opened overnight on the new Covid variant news," said Steen Jakobsen, chief investment officer at Saxo Bank.

"Given poor liquidity today in the US, as many are away from their desks for a long holiday weekend and the market is only for a half session, any significant flows by traders looking to reduce risk could mean significant volatility."

Markets are taking no chances

"Investors are voting with their feet this morning," said Jeffrey Halley, senior market analyst at trading platform Oanda.

"The one bull in the china shop that could truly derail the global recovery has always been a new strain of Covid-19 that swept the world and caused the re-imposition of mass social retractions.

"Markets are taking no chances, equities are falling, haven currencies such as the US dollar, Japanese yen and Swiss franc are rallying… US 10-year bond yields have moved sharply lower, and oil has slumped."

Growth and central banks should provide cushion

"With equity markets at all-time highs, thin year-end liquidity and COVID cases up again, a pull-back seems logical," said Emmanuel Cau, head of European equity strategy at Barclays.

"But we believe resilient growth and patient central banks should continue to provide cushion on a medium-term horizon, while investors have dry powder to buy dips.

"What is key is to find out whether current vaccines remain effective against the variants, or not. COVID uncertainty might force central banks to err on the side of caution."

Travel industry hits violent storm

"Fear has gripped the financial markets with the travel industry flying into another violent storm, after the discovery of a new COVID strain which could be far more contagious and may render vaccines less effective," said Susannah Streeter, senior investment and markets analyst at broker Hargreaves Lansdown.

"There are now fears that the highly mutated COVID strain discovered in states in Southern Africa will prompt fresh shutdowns.

"The decision by the UK government to impose stringent quarantine rules on six southern African countries within hours has severely rattled the travel and tourism industry."

Read more: Jay Powell's renomination as Fed chair will keep inflating a stock market bubble that is a systemic risk to the economy, Stifel's top strategist warns. He shows why stocks haven't been this overextended since 1929 or 1999 — and shares when he thinks the bubble will pop.

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