Stock markets roiled anew by fears about emerging coronavirus variant

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  • Oil prices fall 12% below $70 a barrel

Global stock markets and oil prices fell on Friday after South Africa identified a new, potentially rapidly spreading coronavirus variant and the European Union proposed suspending air travel from the region.

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The 27-member EU proposed a mass travel suspension to member governments after South Africa said the so-called Nu variant was spreading in its most populous province.

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Britain immediately banned flights to and from South Africa and five surrounding countries. Austria imposed a 10-day lockdown, while Italy restricted the activity of unvaccinated people. The Americans were advised by their government to avoid Germany and Denmark. Belgium and Israel have already reported a handful of people who have tested positive for the new variant, and the plethora of data points has added to a flurry of uncertainty.

In New York, the Dow Jones Industrial Average fell more than 2.5 percent to end at 34,899, its biggest drop in more than a year. In Toronto, the TSX Composite Index ended the day down nearly 500 points, or 2.25 per cent, at 21,125.

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“This news has completely overshadowed the initial anecdotal reports of strong in-person and online traffic leading to Black Friday sales,” said Colin Czynski with SIA Wealth Management in Toronto.

Due to the Thanksgiving holiday on Thursday, Friday will be a generally quiet day for US stock markets, as the stock markets in New York are set to close at 1 p.m.

Oil and travel companies hit hardest

This diluted trade could potentially worsen market concerns as there is a smaller pool of buyers and sellers available to offset outliers.

“What you’re seeing is the absence of a lot of active managers in the US and the worrying panic selling around the world,” Starlight Capital CEO Dennis Mitchell said in an interview.

The VIX – known as Wall Street’s “fear index” because it measures volatility – rose more than 40 percent to above 26 points. This is its highest level since January 2021, before the vaccination campaign began.

Anything related to energy or travel and tourism is going to be particularly difficult as investors digest the prospect of another round of limits on international travel.

The North American benchmark oil price, known as West Texas Intermediate, fell more than $10 US to close at over $68 a barrel. This is the worst one-day performance for oil since the price fell below zero in April 2020.

While the concern is real, says Jeremy McCrea, managing director of Raymond James Energy Research, some oil sales are coming from traders who have been locking in profits in recent days while they can.

He said in an interview, “Given how much oil prices have risen…

“Wait a few weeks until we have a better idea of ​​what this really means.”

McCurry said the oil market has had a particularly volatile few weeks, first with OPEC trying to push prices higher by slowing production growth, then releasing millions of barrels to counteract the Biden administration.

With fears now of a new variant to curb global demand for oil, he said it shows “there are still a lot of big factors that could drive prices up significantly.”

Shares of Air Canada fell more than eight per cent, while shares of cruise line Carnival fell 11 per cent. Hotel chains Hilton and Marriott both fell more than six per cent.

“These announcements have fueled a sell-off in travel-related stocks (airlines, cruise lines, hotels, etc.) and fueled a rally in stay-at-home and vaccine stocks,” Cieszynski said.

Shares of Pfizer rose nearly seven percent and shares of Moderna rose more than 22 percent.

“Today’s price action and sudden move were a good reminder of the need to avoid virus complacency in 2022,” currency analyst Audrey Child-Freeman with Businesshala Intelligence said in a note to clients.

Lisa Kramer, professor of finance at the Rotman School of Management in Toronto, says investors are reacting with the same kind of fear they did at the start of the pandemic.

She said in an interview, “It’s not uncommon when dramatic news comes out for some people, for some people.” “And many people don’t need to panic for the markets to react strongly.”

Cryptocurrencies, which are considered a safe store of value, sold heavily as investors turned to things like gold, bonds and the US dollar.

“In times like these, we have a fair idea of ​​what investors regard as a real, reliable safe haven and bitcoin has fallen eight percent today, dealing a fatal blow to its safe-haven credentials. , another crypto myth that has surfaced over the years, despite having zero evidence to back it up, said analyst Craig Erlam with forex firm Oanda.

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