European stock markets panic after the discovery of a new variant of Covid

Posted on Nov 26, 2021 9:48 AMUpdated Nov 26, 2021, 11:42 AM

There is an air of panic this Friday on the world stock markets. The discovery of a new variant of the coronavirus in South Africa has rekindled investors’ worst fears about a return of the pandemic. Potentially more contagious than the existing variants, two cases of this variant called “B.1.1.529” have already been identified in Hong Kong.

The flagship index of the Paris Bourse, the CAC 40, opened very sharply on Friday. It evolved to 6,771 points early in the morning, down 4.3%, far from its historic record of 7,156 points recorded last week. The DAX 40 fell 3.4% and the pan-European STOXX 600 index fell 3.2%.

Flight ban

The Old Continent is not the only one to be afraid of this new variant. Asian stock markets closed in the red. The Tokyo Stock Exchange’s Nikkei index fell 2.53% at the close, while the Hong Kong Hang Seng dropped 2.7%. Futures also pointed to a sharply lower opening on Wall Street, with the tech-heavy Nasdaq down more than 1% and the Dow Jones and S&P 500 down more than 2%.

The UK and Israel have already announced a ban on flights to and from six southern African countries in an attempt to stem the spread of the variant. The European Commission has also proposed to suspend flights from the region, while Italy, Germany and France in particular have already banned entry from South Africa.

The announcements reminded investors of the risks associated with the pandemic, including border closures and global trade disruptions. While Europe is already facing a fifth particularly virulent epidemic wave, Morocco announced Thursday the cancellation of all flights with France.

Eurofins Scientific, the only CAC 40 value on the rise

Airlines are among the most affected stocks on the stock market. This morning, Air France-KLM, Lufthansa and IAG fell from 6.5% to 16%. Within the CAC 40, Airbus collapsed by 12.4%, Safran by 8.9% and the commercial property company Unibail-Rodamco-Westfield by 13.6%. The only value in the Parisian index on the rise, the analysis laboratory Eurofins Scientific, driven by the prospect of a rebound in covid tests, climbed at the same time by around 6%.

The panic is not limited to the equity markets: oil is also falling sharply. The barrel of US crude (WTI) sank 5.4% early in the morning to 74.18 dollars, while Brent lost 4.5% to 78.49 dollars.

Investors, looking for safe havens, have fallen back on sovereign bonds. Long-term rates, which move in the opposite direction to price, fell sharply all over the world. The French rate moved to 0.04%, down 6 basis points since the start of the day. The German Bund posted a similar decline, to -0.32%, while the yield on US 10-year Treasuries was down 12 basis points to 1.51%.

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