Global stocks and oil prices tumbled on November 26 after South Africa found a fast-spreading coronavirus variant and the European Union proposed suspending air travel from southern Africa.
While London’s benchmark fell 3% and Tokyo lost 2.5%, Shanghai, Frankfurt, and Hong Kong also declined sharply. Futures for the Dow Jones Industrial Average dropped more than 2%.
Some European countries already tightened anti-virus controls this week after their own case numbers spiked. Austria imposed a 10-day lockdown, while Italy restricted activity by unvaccinated people. Americans were advised by their government to avoid Germany and Denmark.
The 27-nation EU proposed the travel suspension to member governments after South Africa said the variant was spreading in its most populous province. Britain banned flights from South Africa and five nearby countries.
“Investors are likely to shoot first and ask questions later until more is known,” Jeffrey Halley of Oanda said in a report. That was evident from the action in the bond market, where the yield on the 10-year U.S. Treasury note fell to 1.54% from 1.64% on Wednesday. The bond market was closed Thursday in the U.S. for Thanksgiving.
Frequently Asked Questions
A vaccine works by mimicking a natural infection. A vaccine not only induces immune response to protect people from any future COVID-19 infection, but also helps quickly build herd immunity to put an end to the pandemic. Herd immunity occurs when a sufficient percentage of a population becomes immune to a disease, making the spread of disease from person to person unlikely. The good news is that SARS-CoV-2 virus has been fairly stable, which increases the viability of a vaccine.
There are broadly four types of vaccine — one, a vaccine based on the whole virus (this could be either inactivated, or an attenuated [weakened] virus vaccine); two, a non-replicating viral vector vaccine that uses a benign virus as vector that carries the antigen of SARS-CoV; three, nucleic-acid vaccines that have genetic material like DNA and RNA of antigens like spike protein given to a person, helping human cells decode genetic material and produce the vaccine; and four, protein subunit vaccine wherein the recombinant proteins of SARS-COV-2 along with an adjuvant (booster) is given as a vaccine.
Vaccine development is a long, complex process. Unlike drugs that are given to people with a diseased, vaccines are given to healthy people and also vulnerable sections such as children, pregnant women and the elderly. So rigorous tests are compulsory. History says that the fastest time it took to develop a vaccine is five years, but it usually takes double or sometimes triple that time.
In midday trading, the FTSE in London fell to 7,099.69 and the DAX in Frankfurt lost 3.1% to 15,429.26. The CAC in Paris plunged 3.8% to 6,805.72.
On Wall Street, the future for the benchmark S&P 500 future lost 1.7% and the futures for the Nasdaq slipped 1%. U.S. markets were closed Thursday and are due to reopen Friday for a shortened trading session.
In Asia, the Shanghai Composite Index lost 0.6% to 3,564.09 and the Nikkei 225 in Tokyo declined to 28,751.62. The Hang Seng in Hong Kong tumbled 2.7% to 24,080.52.
Investors already were more cautious after Federal Reserve officials said in notes from their October meeting released this week they foresaw the possibility of responding to higher inflation by raising rates sooner than previously planned.
Investors worry central bankers might feel pressure to withdraw stimulus earlier than planned due to stronger-than-expected inflation. The Fed said earlier it foresaw keeping rates low until late next year.
Financial markets had been encouraged by strong U.S. corporate earnings and signs the global economy was rebounding from last year’s history-making decline in activity due to the pandemic. Stock prices have been boosted by easy credit and other measures rolled out by the Fed and other central banks.In energy markets, benchmark U.S. crude fell $4.22, or 5.4%, to $74.17 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international oils, shed $4, or 4.9%, to $76.92 per barrel in London.