The new variant of covid detected in South Africa could be more contagious and more complex to stop by vaccines, according to the first investigations. The markets are already beginning to discount a gloomy scenario with sharp declines in the European stock markets and in other risk assets such as oil, which has lost more than 10%. The Ibex 35 has dropped almost 5% to stay shivering at 8,400 points. The declines have become strong in the rest of the European pairs and on Wall Street. On the contrary, the yen and gold, , become strong in the midst of turbulence. The dollar, for its part, has fallen.
Putting the focus on Spain, the Ibex 35 has taken a notable hit. The index has lost 4.96% to 8,402.7 points on its worst day since June 2020. During the week it fell 4% after this fateful Friday. It is his worst week since October 2020.
In response to the technical comments of Joan Cabrero, Ecotrader advisor, the Spanish selective clearly pierces the support it had at 8,550 at the end of the week and is already looking at the next one: the whole 8,250. In the worst case, Cabrero warns, it would already go to 7,700.
Panic over the new covid variant has had an impact. The worst of the Ibex 35 on the day was IAG, leaving more than 15%. It is followed by other tourism or travel values such as Amadeus or Aena, with falls of over 8%, and Meliá, which lost more than 7%. With regard to banks, Santander lost almost 9% and BBVA more than 7%. Sabadell leaves more than 6% and Bankinter more than 5%, although at the beginning of the day it fell more than 11%. These falls endanger the arch-commented .
In Europe, the falls have been in line with the Ibex. The EuroStoxx 50 dropped 4.74%, the Dax 4.15%, the Cac 40 4.75%, the Ftse Mib 4.60% and the Ftse 100 3.64%. On Wall Street, with a shortened session after Thanksgiving, the falls have been somewhat more moderate: the Dow Jones falls just under 2.5% and the S&P 500 and the Nasdaq are around 2% declines.
At a technical level and pointing to the EuroStoxx 50, its support is at 3,900-3,965 units, less than 5% below, according to Cabrero. If it reaches that zone, the European stock market would offer “an extremely attractive return/risk equation to attack the market,” says the technical analyst.
At the moment, Europe seems to be taking the brunt of the new fears with the virus. “Europe is the most affected. It is the region of the world with the most new cases and is most exposed to the slowdown in global growth that may occur. Europe has the highest ratio of exports / GDP in the world, at 45%, and the highest ratio of corporate revenue coming from abroad, more than 50%,” says Ben Laidler, eToro’s market strategist.
From Link Securities they agree with this analysis, noting that “investors’ attention continues to be focused on the evolution of the pandemic in Europe, a region that currently accounts for almost 70% of the new cases of covid-19 in the world.” “Everything seems to indicate that the governments of the region are going to opt for surgical measures for the moment, denying the global confinement of the population that, as we have been pointing out in our comments, would entail a high political and economic cost that they are not willing to Thus, everything seems to indicate that these governments, with the new German coalition executive at the helm, are going to promote the use of health passports, the promotion of vaccinations and the generalization of the use of booster doses for the entire population. population”, comments from the firm Juan J. Fernández-Figares.
falls in asia
Beyond the bad European situation, Asian stocks have suffered their steepest fall in two months after announcing the detection of a new variant of the coronavirus, possibly resistant to vaccines.
Variable income in Asia has been the first to suffer the consequences of this new variation. Casino and beverage stocks have suffered sell-offs in Hong Kong, while travel firms slumped in Sydney have had a black day.
The detected cases are being reported in South Africa and in neighboring countries, but their expansion is being rapid and there are already two cases identified in Hong Kong from the South African region, one in Israel (pending two suspected cases) and another in Belgium, the latter is the first in Europe.
Japan’s Nikkei has corrected 2.5% and oil futures have lost more than 10%, lowering WTI Texas below $70, also amid new demand fears and possible bans on travel between countries. The demand for fuels is the most sensitive to mobility restrictions, which are beginning to be announced in several countries.
Soft commodities, from cocoa to cotton, fell this Friday with Paris wheat futures also falling as sales in financial markets skyrocketed. Cocoa fell as much as 3.1% in New York, nearing its lowest level in four months, as US markets reopened after Thanksgiving. Arabica coffee has fallen from its decade high and cotton too. As for cereals, French wheat slides from close to a record. “Markets are experiencing severe risk aversion,” Michael McDougall, managing director of Paragon Global Markets in New York, told Bloomberg.
Scientists have claimed that the variant, detected in South Africa, could evade immune responses. British authorities believe it is the strongest variant to date and fear it could resist vaccinations, so they have rushed to impose travel restrictions with South Africa.
“You shoot first and ask questions later when this kind of news comes out,” Ray Attrill, head of currency strategy at National Australia Bank in Sydney, told Reuters.
“At this point it is too early to assess the possible economic consequences, but any new wave could cause serious economic damage,” says Holger Schmieding, Berenberg’s chief economist. “As a potentially mitigating factor, the world is now on high alert and has increased its capacity to develop, adjust and produce vaccines,” he stresses.
Still, uncertainty is such that South Africa’s rand falls sharply 1% to a one-year low in early trading. The risk-sensitive Australian dollar and New Zealand currency are falling to three-month lows.
Cryptocurrencies are not spared from turmoil either. The bitcoin increases the losses infected by the concern of the market, and has come to yield more than 8% to 54,000 dollars. The virtual currency par excellence is already leaving more than 20% from the all-time highs registered at the beginning of the month. Ether, for its part, has fallen more than 9%.
Safe haven assets work
Every cross has its face, in this case it is for safe-haven assets such as the yen, gold or high-quality sovereign debt. The yen rose more than 1% against the dollar, while gold rose 1% to $1,800 an ounce, easing afterwards. Investors seek refuge in the best-performing assets amid turmoil.
The US currency is also less than half a percentage point in its cross with the euro, which . Precisely the US currency is on a roll, crushing a euro that lately has not raised its head at the crossroads. “The euro, which otherwise appears to have benefited marginally from its underyielding condition as the new variant rattles markets, could hold above 1.1200 over the weekend,” ING analysts note in a note.
In the bond market, increased risk aversion leads to increased investor exposure to sovereign debt markets in advanced economies, contributing to lower yields. In the case of Spain, the yield on the Spanish bond is reduced by more than 14%, to 0.424%. In the case of the German bond, the decline exceeds 20% and stands at -0.3395%.
The EU restricts flights with southern Africa
The consequences of the appearance of the new variant are already here. The 27 states of the European Union have quickly reached an agreement to temporarily suspend travel to southern Africa and activate a border closure with this region. This morning Ursula Von der Leyen, president of the European Commission, had already warned that they would study this option, but now the decision has been ratified by Brussels, which seeks with this measure to “stop the spread of the virus.”
The United Kingdom, criticized for the slow management of previous strains, has been the first to announce limits on entries into the country and this midday the temporary ban on planes coming from both South Africa and five other neighboring countries will come into effect: Namibia, Lesotho , Eswatini, Zimbabwe and Botswana. The six African countries will become part of the UK’s red list from Sunday and travelers will be required to quarantine in hotels upon arrival.
Other governments have followed the lead of the UK and have also restricted entry from South Africa. This is the case of Israel or Singapore (which adds Mozambique to the list and limits entries to those who have been outside those countries for more than 14 days).
How is the new variant?
Little is known about the new variant. However, scientists have revealed to the press that it has a “very unusual constellation” of mutations, worrying because they could help it dodge the body’s immune response and make it more transmissible.
Scientists say it carries a large number of mutations in its protein, which plays a key role in the entry of the virus into cells in the body. It could also complicate the action of vaccines. Researchers are still trying to determine if it is more transmissible or deadlier than the previous ones.
Where does it come from?
So far there are only speculations. A scientist at the UCL Genetics Institute in London says it likely evolved during chronic infection from an immunocompromised person, possibly in an untreated HIV/AIDS patient. South Africa has 8.2 million people infected with HIV, the most in the world. The beta variant, a mutation identified last year in South Africa, can also come from a person infected with HIV.
How is it spreading?
As of Thursday, almost 100 cases had been detected in South Africa, where it has become the dominant strain among new infections. The first results of the PCR test showed that 90% of the 1,100 new cases reported on Wednesday in the South African province that includes Johannesburg were caused by the new variant, according to Tulio de Oliveira, a professor of bioinformatics who…
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