Stocks and oil prices fall as new Covid variant spooks markets

Stocks and oil prices fell as global investor concern mounted over a new variant of Covid-19 that has prompted the UK to impose harsh travel restrictions on southern African countries.

The sharp sell-off in equities was led by Hong Kong, where two cases of the variant were confirmed late on Thursday. The city’s benchmark Hang Seng index shed as much as 2.5 per cent amid concerns that the new strain could slow the global economic recovery and further isolate the Asian financial hub, which has one of the world’s most stringent quarantine systems.

“I look at my screen today there’s hardly any green — it’s all red,” said Andy Maynard, a Hong Kong-based trader at investment bank China Renaissance. “It’s all on the tail of this Covid strain.”

Elsewhere in Asia, Tokyo’s benchmark Topix index fell 2 per cent on Friday after the UK banned direct flights from the six countries including South Africa until quarantine hotels were up and running.

Futures markets tipped US stocks to drop 1 per cent when markets opened on Wall Street later in the day, while London’s FTSE 100 and Europe’s Stoxx 50 indices were both expected to fall about 2 per cent.

Travel stocks were among the hardest hit, with Japan Airlines down more than 6 per cent and Hong Kong’s flag carrier Cathay Pacific shedding almost 4 per cent on worries over increased international travel restrictions.

The so-called B.1.1.529 Sars-Cov-2 variant, first identified in Botswana, is believed to be behind a surge in Covid cases in southern Africa over the past week and has alarmed global health officials because of its apparent ability to evade vaccines and spread more quickly than the Delta variant.

Israel has also banned travellers from South Africa, and the World Health Organization will hold an emergency meeting on Friday to discuss the new variant, which has been described as the most concerning strain yet encountered by researchers.

In currencies, the new travel restrictions sent the South African rand down as much as 1.7 per cent to about R16 against the dollar, marking the currency’s weakest level in more than a year as the country faced the prospect of spoiling this year’s tourist season.

Other emerging markets currencies including the Mexican peso and Turkish lira slid about 1.4 per cent.

In commodities markets, concerns over disruption to global trade hit oil prices, with international benchmark Brent crude down 2.5 per cent at $80.14 a barrel. US marker West Texas Intermediate fell 2.2 per cent to $75.92.