Shares fall lower, bonds jump when the virus variant scares investors

Passers-by wearing protective masks are reflected on an electronic board showing stock prices outside a broker in the middle of the coronavirus (COVID-19) outbreak, in Tokyo, Japan, September 29, 2021. REUTERS / Issei Kato

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  • MSCI AxJ drops 1.8%; S&P 500 futures down 1%
  • US crude falls 2.5%
  • Bond rally drives the 10-year government return down by 8 bps

SYDNEY, Nov. 26 (Reuters) – Equities hit their biggest three-month decline in Asia on Friday, as oil fell following the discovery of a new and possibly vaccine-resistant variant of the coronavirus, prompting investors to rush to bond, yen and dollar safety.

MSCI’s index for Asian equities outside Japan (.MIAPJ0000PUS) fell by 1.8%, the sharpest decline since August. Casino and beverage stocks were sold in Hong Kong, travel stocks fell in Sydney and Tokyo. Japanese Nikkei (.N225) slipped 3% and US crude oil futures fell 2.7% due to new demand.

The S&P 500 futures fell by 1% at the latest and the Euro STOXX 50 futures by 2%.

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Little is known about the variant, discovered in South Africa, Botswana and Hong Kong, but researchers said it has an unusual combination of mutations and may be able to avoid immune responses or make it more transmissible. Read more

British authorities believe it is the most important variant to date, worrying that it may resist vaccines and have rushed to impose travel restrictions. Read more

“You shoot first and ask questions later when this type of news comes out,” said Ray Attrill, head of currency strategy at the National Australia Bank in Sydney, when the news rattled currency traders.

Investments in interest rate hikes also declined when the Fed funds’ futures rose and two-year government interest rates fell by 6 basis points, the sharpest decline since March 2020.

The South African rand fell more than 1% to a one-year low on Friday and the risk-sensitive Australian and New Zealand dollars fell to a three-month low.

Japan and Australia each hinted at possible border closures in response to the new variant. Read more

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

“Reopening hopes can be crushed.”

Share sales in Asia have global shares (.MIWD00000PUS), on course for their worst week since early October. Dow Jones futures fell 1%, while FTSE futures fell 1.9%.

Movements in government bonds were also strong in the longer term, with 10-year government interest rates down eight basis points to 1.5618% and 30-year interest rates down 7 bps to 1.8963%.

Even though it leaves the return in recent intervals, the heat has come from investments in the pace of interest rate increases and the Fed Fund’s futures contract from December 2022 was last up 9 bps.

The yen jumped about 0.6% to $ 114.67 per dollar and the Aussie was down 0.6% at $ 0.7141 most recently. The euro rose 0.1% to $ 1.1221, as security rather than policy differences drove trade in Asia.

The measures come against an already growing background of concerns about the outbreak of covid-19, which pushes restrictions on movement and activity in Europe and abroad.

European countries increased covid-19 booster vaccinations and sharpened curbs overnight. Slovakia announced a two-week deadlock, the Czech government will close bars early and Germany crossed the threshold of 100,000 COVID-19-related deaths. Read more

Shanghai restricted tourism activities on Friday and a nearby city cut public transport as China doubles its zero-tolerance strategy, which is also nervous for traders. Read more

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Reporting by Tom Westbrook; Editing Lincoln Feast.

Our standards: Thomson Reuters Trust Principles.

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