Stocks, Futures Sink; Virus Fears Spark Haven Rush: Markets Wrap

(Bloomberg) — A post-Thanksgiving selloff spread across global stocks and U.S. index futures amid fears a new coronavirus variant identified in South Africa may spark fresh outbreaks and scuttle a fragile economic recovery.

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December contracts on the S&P 500 Index slumped 1.7%, the most since September, as U.S. markets were set to return after the holiday. European stocks dropped the most since July. A rush for havens sent Treasury yields tumbling, with the 10-year rate shedding 10 basis points. Crude oil to emerging-market assets fell, while the dollar extended a 16-month high.

The World Health Organization and scientists in South Africa are studying the recently identified variant, which has been described as very different to previous versions and of serious concern. The U.K., Singapore and Israel curbed travel from South Africa and some neighboring countries. Hong Kong confirmed two cases of the strain.

“It’s a scary headline” about the virus variant, so it may have caused a knee-jerk reaction, said Kyle Rodda, an analyst at IG Markets Ltd. He added that “North America off the desks means there’s a wall of buyers missing” and that thinner markets make for more pronounced moves.

The detection of the strain comes on top of concerns in markets about high inflation and the prospect of quicker exit from ultra-loose monetary settings. Global shares are up about 16% this year, weathering a plethora of risks after investors poured almost $900 billion into equity exchange-traded and long-only funds in 2021 — topping the combined total from the past 19 years.

MSCI Inc.’s Asia-Pacific equity gauge slid to the lowest since early October, with Japan and Hong Kong underperforming and travel shares among the biggest decliners. U.S. and European futures fell and the 10-year Treasury yield dropped to 1.55%.

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The dollar was near a 16-month high, while South Africa’s rand weakened almost 2%. Crude oil shed more than 3% and gold rose. U.S. markets, closed Thursday for Thanksgiving, will have a shortened Black Friday session.

December futures on the Cboe Volatility Index, a gauge of implied equity swings for the S&P 500, advanced as traders braced for turbulence when U.S. markets reopen.

For more market analysis, read our MLIV blog.

Here are some key events this week:

Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday

Some of the main moves in markets:

Stocks

The Stoxx Europe 600 fell 2.6% as of 8:03 a.m. London time
Futures on the S&P 500 fell 1.7%
Futures on the Nasdaq 100 fell 1%
Futures on the Dow Jones Industrial Average fell 2.1%
The MSCI Asia Pacific Index fell 1.8%
The MSCI Emerging Markets Index fell 2%

Currencies

The Bloomberg Dollar Spot Index rose 0.2%
The euro rose 0.2% to $1.1234
The Japanese yen rose 1% to 114.17 per dollar
The offshore yuan fell 0.1% to 6.3946 per dollar
The British pound fell 0.3% to $1.3288

Bonds

The yield on 10-year Treasuries declined 10 basis points to 1.53%
Germany’s 10-year yield declined seven basis points to -0.32%
Britain’s 10-year yield declined nine basis points to 0.88%

Commodities

Brent crude fell 3.6% to $79.25 a barrel
Spot gold rose 1% to $1,807.02 an ounce