Did we see a rerun of early 2020 on Friday when the pandemic first slid over the world?
Global stocks and commodity prices – led by oil – plunged on what is now being called Black Friday as investors sprinted for safe haven assets after a new coronavirus variant shook market sentiment.
Investors were quick to think the worst about the new variant, called Omicron by the World Health Organisation – thinking it could prove more infectious than the already highly infectious Delta variant.
That saw investors across the globe reassess the path of the global economic recovery heading into 2022, recasting their confident assertions that central banks – including the Fed, Reserve Bank of Australia and Bank of England will lift rates next year to combat rising inflation.
The Friday after Thanksgiving is when the huge US retailing season starts with deeply discounted sales kicking off in five or six weeks when most retailers make most of their profits for the year – hence the term, Black Friday.
It is also a time of light trading volumes with many dealing rooms understaffed because of Thanksgiving – a situation that likely accentuated the size and depth of the falls.
It should have been called Red Friday for the massive losses seen across all markets on Friday in a truncated trading session in the US (Wall Street ended at 1pm) but commodities, bonds and currencies continued dealing as investors fled for safe haven assets.
US bond yields fell sharply as investors headed for their safety – the yield on the key 10-year bond slumped 16 points to end at 1.479% as investors plunged billions of dollars of cash into them while they wait to see the fallout from the appearance of the new variant.
Oil, iron ore, copper, silver sold off heavily or reported little gain. Gold which is supposed to be boosted by instability and volatile trading conditions, only saw a small rise.
The selloff wiped tens of billions of dollars in value from share prices (starting with Australia’s 1.6% slump on Friday which cut the value of the market by more than $A35 billion). The ASX will restart trading today looking at that 104-point fall.
A World Health Organisation panel classified the new variant as a highly transmissible virus of concern and named it Omicron. That saw the UK, US, Canada and other countries in imposing new travel rules. Singapore, India and Japan also tightened rules and testing for arrivals.
The new variant made its first appearance outside Southern Africa in Hong Kong and then Belgium. Israel and Botswana have also reported cases. The first case was reported on November 9 in South Africa and identified only on Thursday with genomic information issued to health authorities around the world.
News of at least two cases in Sydney will further worry ASX investors and others today (Monday).
The Dow plunged more than 900 points or 2.53% at 34,899.34 in its largest percentage drop in more than a year. The S&P 500 lost 2.27%, its worst one-day drop since February, and the Nasdaq Composite shed 2.23%, its biggest one-day slump in two months.
Europe’s benchmark STOXX 600 index ended 3.7% lower on the day, leaving it down 4.5% for the week. London’s FTSE slumped 3.6% while 4% plus losses were recorded in Paris, Germany, Italy and Spain.
The volatility gauge for the main stock markets hit its highest in nearly 10 months.
Asian stocks suffered their sharpest drop in three months on Friday. Hong Kong’s Hang Seng lost 3.8% over the last five days, Tokyo’s Nikkei 3.3%, the ASX 200 lost 1.6% after Fridays 1.7% plunge. The Shanghai composite added 0.7% as Chinese investors ignored the big story offshore.
On Wall Street, shares of Moderna soared 20.5%, the most on S&P 500 and the Nasdaq, while a different COVID-19 vaccine supplier, Pfizer added 6.1%. Zoom Video Communications, another pandemic fav, jumped 5.7%.
Netflix shares rose 1.1% but Apple shares lost 3.1% and Amazon shares shed 2.2% as investors sold and bolted.
On the Dow, Boeing was among the worst performers, with shares down 5.4% after more and more countries toughened entry rules for new travellers or banned them from Southern Africa all together.
Shares in Delta Air Lines shares slumped 8.4%, Southwest Airlines lost 4.2% and JetBlue Airways was 5.8% lower. Cruise operators Carnival and Norwegian Cruise Line dropped 11% each.
