Stocks slide, safe havens rally as new variant of COVID-19 scares investors

Passers-by wearing protective masks are reflected on an electronic board displaying stock prices outside a brokerage house amid the coronavirus disease (COVID-19) outbreak, in Tokyo, Japan, September 29 2021. REUTERS / Issei Kato

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SYDNEY, Nov.26 (Reuters) – Asian stocks suffered their biggest drop in two months on Friday after the detection of a new, potentially vaccine-resistant variant of the coronavirus that prompted investors to rush to the safety of bonds, du yen and dollar.

The largest MSCI index for Asia-Pacific stocks excluding Japan (.MIAPJ0000PUS) fell 1.3%, its biggest drop since September. Casino and beverage stocks were sold in Hong Kong, and travel stocks fell in Sydney.

The Japanese Nikkei (.N225) slipped 2.5% and US crude oil futures also fell nearly 2% on new demand fears.

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Scientists said the variant, detected in South Africa, may be able to evade immune responses. British officials believe it is the most important variant to date, fear it may be vaccine resistant and have rushed to impose travel restrictions on South Africa. Read more

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

The South African rand fell 1% to its lowest level in a year at the start of trading. The risk-sensitive Australian and New Zealand dollars fell to their lowest level in three months and S&P 500 futures fell 0.9%.

Sales in Asia have global stocks (.MIWD00000PUS), on course for their worst week since early October. Dow Jones futures fell 1%, while FTSE and Euro STOXX 50 futures fell about 1.4% each.

Little is known about the new variant. However, scientists told reporters he had a “very unusual constellation” of mutations, which were of concern because they could help him bypass the body’s immune response and make it more transmissible. Read more

“Markets are anticipating the risk of another global wave of infections here if vaccines are ineffective,” said Moh Siong Sim, currency analyst at the Bank of Singapore.

“Hopes of reopening may be dashed.”

Treasury bill movements were also large after the Thanksgiving holiday, and yields quickly pulled back some of the week’s gains. Benchmark 10-year yields fell almost 6 basis points to 1.5841%.

The yen jumped about 0.4% to 114.84 per dollar and the Aussie lost 0.5% for the last time to $ 0.7148.

The measures come amid concern over COVID-19 outbreaks resulting in restrictions on movement and activity in and as markets aggressively assess U.S. rate hikes next year.

European countries have extended COVID-19 booster vaccinations and tightened restrictions overnight. Slovakia has announced a two-week lockdown, the Czech government will close bars earlier and Germany has crossed the threshold of 100,000 COVID-19-related deaths. Read more

Shanghai curtailed tourism activities on Friday and a neighboring city cut public transportation as China doubles its zero-tolerance approach that is also disrupting traders. Read more

At the same time, a host of stronger-than-expected US data points have caused federal funds futures markets to price up to three rate hikes in 2022.

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Reporting by Tom Westbrook; Editing by Lincoln Feast.

Our Standards: Thomson Reuters Trust Principles.

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