TOKYO (BLOOMBERG, REUTERS) - Global investors fled stocks and flocked to havens on Friday (Nov 26) on Friday (Nov 26) amid fears a coronavirus variant first identified in South Africa could spark fresh outbreaks and scuttle a fragile economic recovery.
Futures for the Dow Jones Industrial Average plunged more than 800 points, or 2.4 per cent, as US markets were set to return after the Thanksgiving holiday on Thursday. Europe's stock benchmark fell the most this year. Ten-year Treasury yields shed 11 basis points while the Japanese yen jumped the most since its March 2020 rush for safety.
In Asia, Hong Kong stocks led the sell-off with the Hang Seng Index sinking 2.67 per cent. The B1.1.529 variant has been found in two travellers arriving in the territory.
Japan's Nikkei 225 also saw sharp losses, tumbling 2.53 per cent. Australia's S&P/ASX 200 index fell 1.73 per cent, South Korea's Kospi index lost 1.47 per cent, while the Shanghai Composite dropped 0.56 per cent.
Singapore's Straits Times Index closed down 1.72 per cent, with all 30 constituent stocks in the benchmark index seeing red. Decliners outnumbered advancers 406 to 139 in the wider Singapore market, with nearly two billion shares worth $1.8 billion changing hands.
The worst performers were Genting Singapore and Singapore Airlines (SIA), which could suffer the brunt of further lockdowns.
Travel stocks, in fact, were among the worst hit globally as the European Union, Britain, Israel and Singapore placed emergency curbs on passengers from South Africa and the surrounding region. British Airways parent IAG tumbled as much as 21 per cent, while Cathay Pacific Airways fell 6.76 per cent. Shares of Japan Airlines dived 6.48 per cent, while SIA dropped 3.81 per cent.
Oil prices also sank on worries over the impact on demand if new containment measures were introduced. US crude dropped as much as 6.4 per cent to trade below US$74 per barrel, while Brent fell 4.5 per cent to US$78.49.
But producers of medical gloves surged on the possibility that the new virus strain would cause a jump in demand for protective gear, just like pandemic did last year. Top Glove Corp, the world's largest maker of disposable rubber gloves, jumped 17.3 per cent in Malaysia and 15.2 per cent in Singapore.
The detection of the new strain comes on top of concerns in markets about high inflation and the prospect of central banks raising interest rates and tightening monetary policy at a faster rate.
Bank of Singapore currency analyst Sim Moh Siong said: "We still don't know how infectious the virus is... it's a general uncertainty. Markets are anticipating the risk here of another global wave of infections if vaccines are ineffective. Reopening hopes could be dashed."
Mr Jeffrey Halley, an analyst at Oanda in Jakarta, said: "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 reimposition of mass social retractions. All we know so far is the B.1.1.529 is heavily mutated, but markets are taking no chances."
The yen emerged as the main safe-haven currency on Friday, jumping 1.1 per cent to 114.06 against the US dollar, while the South African rand slumped more than 2 per cent to a one-year low against the greenback.
As the greenback strengthened against non-haven currencies, the Singapore dollar weakened to 1.3715 against the US currency, down 0.3 per cent from its Thursday close.
US treasuries rallied across the board, with the five-year rate shedding 15 basis points as traders rushed to cut back their bets on rate hikes.
"Every trader in New York will be rushing to the office now," said Mr Frederik Hildner, a money manager at Salm-Salm & Partner, adding that the news of the new variant could mean the end of inflation and tapering debates.
• With additional information from The Straits Times