Stock slips, haven rally as new COVID-19 variant scares investors

SYDNEY: Asian stocks suffered their sharpest fall in two months on Friday after a new and possibly vaccine-resistant coronavirus variant was detected, prompting investors to point to the safety of bonds, the yen and the dollar.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.3%, the sharpest decline since September. Casino and beverage stocks sold off in Hong Kong, and travel stocks declined in Sydney.

Japan’s Nikkei and US crude futures fell nearly 2% amid fresh demand fears.

Scientists said the variant found in South Africa may be able to evade an immune response. British officials think it is the most important version ever, worry that it may oppose vaccines and have hurried to impose a travel ban on South Africa.

“You shoot first and ask questions later,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney.

South Africa’s rand fell 1% in early trade to a one-year low. The risk-sensitive Australian and New Zealand dollars fell to three-month lows and S&P 500 futures fell 0.9%.

Global stocks have been selling in Asia since the start of October, in what is on course for their worst week. The Dow Jones futures fell 1%, while the FTSE futures and the EUR/STOCX 50 futures each lost about 1.4%.

Little is known about the new variant. However, the scientists told reporters that it has a “very unusual constellation” of mutations, as they may help trick the body’s immune response and make it more permeable.

“The market is anticipating the risk of another global wave of infections if vaccines are ineffective,” said Moh Seong Sim, currency analyst at the Bank of Singapore.

“Hopes of reopening may be dashed.”

Treasury moves were also bullish after the Thanksgiving holiday and yields quickly pulled back some of the week’s gains. The benchmark 10-year yield fell nearly 6 basis points to 1.5841%.

The yen jumped nearly 0.4% to 114.84 per dollar and the Australian closed 0.5% down at $0.7148.

The moves come against a backdrop of concerns about COVID-19 outbreaks, which impose restrictions on movement and activity and markets aggressively push the US rate higher next year.

European countries expanded COVID-19 booster vaccinations and tightened restrictions overnight. Slovakia announced a two-week lockdown, the Czech government would close the bar early and Germany passed the threshold of 100,000 COVID-19-related deaths.

Shanghai on Friday limited tourism activities and a nearby city cut public transport as China doubled down on its zero-tolerance approach, which is also troubling businessmen.

At the same time stronger-than-expected US data points are the price of three rate hikes in the Fed funds futures market in 2022.

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