• FTSE closes a massive 266 points lower
  • New B.1.1.529 variant “may pose substantial risk to public health”: Sajid Javid
  • Cases have emerged in South Africa, Hong Kong and possibly Belgium

4.50pm: Black Friday lives up to its name

The FTSE 100 closed sharply lower on Friday, extending its falls in afternoon trading as Wall Street returned in similarly cautious fashion from the US Thanksgiving break with worries over a deadly new coronavirus (COVID-19) variant from South Africa sparking fears over new lockdowns.

At the close, the UK blue-chip index was a massive 266.34 points, or 3.6% lower at 7,044.03, just above the session low of 7,042.12 and well below the opening high of 7,310.37.

On Wall Street, Black Friday also lived up to its name, although with just a half-day’s post-Thanksgiving trading session at least US investors were let off some of the pain.

Around London’s close, the Dow Jones Industrials Average was down over 950 points, or 2.7% at 34,849, while the broader S&P 500 index and the tech-laden Nasdaq Composite both dropped over 2%. US markets close at 1pm ET/ 6pm GMT on Friday.

Craig Erlam, senior market analyst, UK & EMEA, at OANDA commented: “Risk assets are getting pummelled at the end of the week as a new Covid variant sparks fears of new restrictions and lockdowns.

“The most worrying thing about the new strain at the moment is how little we know about it, with early indications being that it could be more problematic than delta. The biggest fear is that it will be resistant to vaccines and be a massive setback for countries that have reaped the benefits from their rollouts.”

He added: “We’ll no doubt learn more in the days and weeks ahead but for now, fear of the unknown will weigh heavily going into the weekend and could carry over into next week. We’re seeing a typical flight to safety in the markets with equities, commodity currencies and oil getting whacked and traditional safe havens like bonds, gold, the yen and swissy getting plenty of love.”

In a small note of optimism, Erlam concluded: “Pfizer has sought to calm nerves, stating that should a vaccine-escape variant emerge, it could produce a tailor-made vaccine in about 100 days. Three months can feel like a long time but when compared to where we were 18 months ago, that is very reassuring as a worst-case. It may not be quick enough to prevent more restrictions this winter though.”

4.20pm: Wall Street joins sell-off

The Footsie is finishing the week with violent bout of blood-letting, with the index now down 260 points or 3.5% at 7,052, wiping out all the gains since 6 October.

Capital Economics chief number cruncher Neil Shearing has shared his initial thoughts on the possible impact of the new variant.

With shares and bond yields having fallen sharply today, with sectors and countries most exposed to the pandemic being hit hardest, Shearing expects those patterns to persist in the near term as investors digest the implications of the new variant.

READ: New Covid-19 super-variant “the worst seen so far”

He also stresses that while it is still very early but there are three points worth making.

“First, the lesson from Delta is that it’s very hard to stop the spread of virulent new variants. Several countries (including the UK) have already imposed restrictions on travel to and from Southern Africa, where the B.1.1.529 strain first emerged. Others are likely to follow suit.”

These restrictions are not likely to prevent it from spreading to other countries, particularly if it’s as contagious as currently feared, he said.

“Second, the lesson from the past couple of years is that it’s the restrictions that are imposed in response to the virus – rather than the virus itself – that causes the bulk of the economic damage. So, the key question is how governments will respond in the event that the B.1.1.529 strain spreads. That in turn will hinge on the extent to which it escapes the vaccines and, importantly, causes strains in national healthcare systems.”

He noted that different approaches to managing the virus are starting to emerge, with the UK and the US governments leaning towards “learning to live with the virus”, while in Europe governments are already adopting new measures in response to a spike in the Delta variant before the ‘Nu’ variant emerged and China is seen as likely to double-down on its ‘zero COVID’ strategy.

China locking down hard will mean localised lockdowns as outbreaks emerge, tighter restrictions on regional travel and a greater likelihood of port shutdowns, he said, leading to his third point, which is that this new variant comes against a global economic backdrop that is very different from the previous waves of the virus.

“Supply chains are already stretched. A virus-related surge in goods spending, or port closures, would exacerbate existing supply strains and add upward pressure to goods inflation. Likewise, a new, more dangerous, virus wave could cause some workers to temporarily exit the workforce, and deter others from returning, making current labour shortages worse.

“All of this will complicate the policy response. At the margin, the threat of a new, more serious, variant of the virus may be a reason for central banks to postpone plans to raise interest rates until the picture becomes clearer.”

The US Fed meets on 15 December, followed by meetings for the Bank of England and ECB on 16 December.

“But unless a new wave causes widespread and significant damage to economic activity, it may not prevent some central banks from lifting interest rates next year,” Shearing said.

If nothing else it is also likely to result in a very uncertain backdrop for companies that are reporting in the week ahead.

3.20pm: Boeing, Merck and Tesla lead US indices lower

The Footsie is scraping along near its day’s lows, down 227 points or 3.1% at 7,084, with US stock joining the sell-off.

Blue chips of the Dow have dropped 2.5%, with American Express, Boeing and Merck & Co the biggest fallers there.

Over on the S&P 500, which is down 1.8%, petroleum companies are among the biggest fallers, along with travel stocks, such as cruise operators Carnival and Royal Caribbean, and the likes of Marriott International (NYSE:MAR), Booking and Delta Airlines.

Risers include Moderna Therapeutics Inc (NASDAQ:MRNA), up 22%, and Pfizer Inc (NYSE:PFE), up almost 7%.

The Nasdaq is least affected but still down 1.4%, with rises for Moderna, BioNTech, Zoom Video Communications and titans Amazon.com and Netflix, offsetting falls for Apple Inc (NASDAQ:AAPL), Tesla Inc (NASDAQ:TSLA), along with Starbucks and retailers.

“US markets have taken their cues from today’s plunge in Asia and European markets as they return from their Thanksgiving break, and are faced with a completely different angle on the Black Friday theme, with sharp early falls in what is set to be a holiday shortened trading session,” says analyst Michael Hewson at CMC Markets.

2.34pm: Look at displacement data, says Credit Suisse

Stocks in London are mostly staying at their lows, while a useful note with the first thoughts of Credit Suisse has just been shared.

The heightened concern of financial markets to the emergence of the new variant B.1.1.529 is understandable, the investment bank says.

“Early evidence suggests a very rapid displacement of the delta variant, which is known to be dominant in South Africa. When we look back to the emergence of the delta wave, the key indicator was how quickly delta increased its share of sequenced cases. Modelling data presented by the Financial Times would indicate a rapid rise in B.1.1.529’s share of cases to circa 90% in areas where it is prevalent.”

The CS team notes vaccination levels in South Africa are low at 28% but the country did suffer a large delta wave, “which should have provided some background immunity against delta”.

Will existing vaccines work?

“We do not yet have data on whether existing vaccines work,” Credit Suiss says. “But laboratory testing is already underway according to the South African National Institute for communicable diseases.

“Initial thoughts from the institute that partial immune escape is likely a view that seems possible given the numerous mutations in comparison to the sequence that existing vaccines were designed against.

“We expect the first view on this to be from in-vitro immunogenicity test, or perhaps from computer modelling of the sequence. We estimate initial lab data could take less than one week to generate given the sequence is already known and work is already ongoing.”

How quickly could a new vaccine be created?

“Previous comments from BioNTech have pointed to a six-week timeframe in which to produce vaccines to new variants.

“We would assume that trials would also need to be conducted to determine if they are both safe and effective. This could add months for mRNA vaccines. Manufacturing is highly fungible. So a large portion of global capacity could pivot to the new vaccine much more rapidly than it took to scale up for the first wave of mRNA vaccines.”

Is it more deadly?

“It is currently too early to determine if the new variant has higher mortality than previous variants. Reported cases only started rising in South Africa on 19 November, so any impact on hospitalizations and COVID related deaths will not have yet emerged.

“Treatment paradigms are significantly in advanced versus the first waves of COVID but impact of efficacy of antibodies is unknown.

“It is worth noting that there have been significant advances in treatment of COVID since it emerged in the disease waves of 2020. The use of widely available steroids and anti-inflammatory drugs such as Roche’s ctemra have significantly improved survival outcomes. More recently antibody therapies targeting COVID (LLY, REGN/Roche, GSK/Vir, AZN) have significantly improved outcomes against COVID variants to date.

“It will need to be seen if that efficacy is equal against the new B.1.1.529 variant. Lastly, the recent positive data from oral antiviral agents [though not quite a positive from Merck – see earlier update below] may also have the potential to slow the spread of any new waves of COVID. The effectiveness of these treatments against new variants of concern will need to be tested but lab results should be expected relatively quickly. In human studies should also yield results relatively quickly if they are run in areas where the prevalence of B. is high.”

Whenever the market sells off like this, wily investors always look for potential bargains.

Here’s Proactive’s take on what those might be and if they are good value or not: Black Friday bargains in the FTSE 350

13.33pm: Mercked

Hopes that Merck’s molnupiravir antiviral pill might deal a decisive blow to Covid have been dented as data just out from the company show lower efficiency than initial tests.

The twice-daily drug reduced the risk of hospitalization or death in at-risk adults with mild-to-moderate COVID to 6.8% compared to 9.7% in the placebo group.

Molnupiravir, which is developed by the US pharma giant with Ridgeback Biotherapeutics, therefore offers an absolute risk reduction of 3.0% and a relative risk reduction of 30%. This is down from the 48% reduction reported at an earlier stage in the trials.

Nine deaths have been reported in the placebo group, compared to one in the molnupiravir group, the companies said.

The initial readings in early October had given a big fillip to financial markets, though today this less encouraging news is not making much of an effect, with the FTSE already down 215 points or 2.95% at 7,094.90.

Wall Street futures are pointing to a 2.2% opening decline for the Dow Jones index, with a 1.7% fall for the S&P 500 and a 1% stumble for the largest hundred stocks on the Nasdaq.

12.40pm: Reports of the new variant appearing in Northern Europe

Local media in Belgium are reporting on two suspected cases of the new Covid-19 variant in the country, which would make these the first cases in Europe, if confirmed.

This would add to cases confirmed in South Africa, Hong Kong, Botswana and Israel.

Ahead of a meeting on this new B.1.1.529 strain, the WHO issued a statement saying under 100 ‘sequences’ have so far been reported so far.

“Early analysis shows that this variant has a large number of mutations that require and will undergo further study. We are grateful for researchers in South Africa and experts on WHO’s Technical Advisory Group on Virus Evolution (TAG-VE) who are assessing this variant.”

Health Secretary Sajid Javid has been speaking in the House of Commons and confirmed no cases of the new variant have so far been detected in the UK.

“Over the past 48 hours a small number of cases of a new variant have been detected on our international genomic database.

“I want to reassure this House that there are no detected cases of this variant in the UK at this time, but this new variant is of huge international concern.”

He the variant is likely to have spread to many more countries and “may pose substantial risk to public health” as it could be “more transmissible than the Delta variant” and could have the potential to evade current vaccines.

The first evidence of this variant was uploaded to the international database in Hong Kong from a case of someone travelling from South Africa, with UK scientists first identifying the threat from this new variant and alerting the international community.

He said the variant is the only one with designated as new variant under investigation with very high priority by UK health agencies.

On financial markets, the FTSE 100 is down 197 points or 2.7% at 7,113.

11.52am: “You don’t need no doctor to know how this plays out for markets”

Here’s some more views on what’s happening today, where the Footsie’s 2.8% fall compares to 2.5% for Germany’s DAX, 2.9% for Italy’s MIB, 3.2% for the CAC 40 in Paris and 3.6% for Spain’s IBEX.

London’s mid-cap index, the FTSE 250, is down over 500 points or 2.2% to 22,777.

Looking to Wall Street’s reopening after the Thanksgiving day holiday, Dow Jones futures are pointing to a 2.3% fall at the open, while the S&P 500 is seeing dropping 1.8% and the tech-fueled Nasdaq 100 is trending down a relatively sedate 1%.

Expectations for central bank tightening are being pushed back, with the market putting a 63% chance of a Bank of England hike in December compared to 93% a week ago, while traders are now expecting the US Federal Reserve to delay its hike from July to September.

Commenting on the new variant emerging from South Africa, Dan Boardman-Weston, chief investment officer at BRI Wealth Management, says: “The new variant appears to have the potential to be more transmissible and to evade vaccines but it’s important to emphasise that nobody is completely sure about this yet. The markets are being led lower by Covid sensitive stocks in the travel, leisure and oil sector with the only positive performers being technology companies that benefit from covid lockdowns.

“We think it’s too soon to quantify the likely impact of this new variant but markets have had a very strong run over the last 12 months and so it is no surprise to see a reaction like this. It’s important to note that if this is going to take the world backwards from a covid perspective then it’s likely that inflation will abate and monetary policy will stay looser for a long time which is likely to be a positive for markets in the medium term.”

Marios Hadjikyriacos, senior investment analyst at broker XM, says: “The underlying concern is that vaccines may be less effective against this ‘Nu’ variant and it may spread easier thanks to its high number of mutations. The jury is still out though, as there isn’t much data available yet.

“Of course, markets aren’t going to wait around until all the details are known. Traders are already running for cover, slashing their exposure to stocks and loading the truck with bonds.”

He added: “It is mostly ‘real economy’ stocks that are getting hammered, with the drop in yields also cushioning the blow in the tech complex.”

Lower yields are also boosting gold, which has climbed back above $1800 and lifted gold miners, including Fresnillo PLC (LSE:FRES) and Polymetal International PLC (LSE:POLY).

Marshall Gittler at BDSwiss notes information from the South African Center for Health Journalism that some of the mutations of the B.1.1.529 variant are situated around the spike protein that might affect how well our antibodies neutralize the #SARSCoV2 virus, which could mean it might escape immunity to some extent, and with some of these mutations looking similar to mutations that have been found to enhance other variants’ transmissibility.

“The UK has temporarily banned flights from South Africa while Singapore and Israel have banned visitors from the country. The fear is that as the variant spreads, these bans could spread to other countries as well, once again sending world travel — and oil demand — into a tailspin,” says Gittler.

“I’m not a doctor so I can’t give an opinion on whether this new variant is anything to worry about. Mutations can be more or less severe, we don’t know yet. But of course we don’t need no doctor to know how this plays out in the markets: risk aversion.

“The growth-sensitive commodity currencies down, safe-haven JPY and CHF up. It was notable that USD wasn’t included in the safe-haven currencies this time, perhaps in recognition of the country’s poor performance in the vaccine ratings – bottom of the list among the major industrial countries. Although Switzerland is next-to-last and has a much higher infection rate than the US (690 new cases a day per 1mn people vs 290 cases for the US), so clearly “safe haven” doesn’t necessarily mean safe from infection.”

11.05am: FTSE rally runs out of steam

The mini-rally for London’s blue chips quickly ran out of steam, with the index back down 218 points or 3% to 7,092.

It is being reported that Health secretary Sajid Javid will make a ministerial statement in the Commons at 11am about the new COVID variant, following the government’s confirmation that six countries have been added to the travel red list.

The World Health Organization called a meeting on Friday to discuss the B.1.1.529 variant and decide if it will be designated a “variant of interest or concern”, which would see it named after the Greek letter “Nu” under the WHO naming scheme.

There’s a new update from Barclaycard saying that the volume of payment transactions for the UK’s Black Friday by 9am this morning was up 21.4% on last year and up 5.4% on 2019.

Stock market gains across European markets made in the course of October and November have pretty much all evaporated, notes market analyst Chris Beauchamp at IG, as investors around the globe react to the new Covid variant that has appeared in South Africa.

“Early reports suggest it spreads quickly and could be much more resistance to existing vaccines. While the situation appears confined to the region for now, markets are scrambling to price in a return of restrictions across the globe, taking their cue from the UK’s travel restrictions and the tighter restrictions imposed in Portugal.

“This process is always a noisy and difficult one, and has been exacerbated by the lack of liquidity that is always a feature of markets around Thanksgiving.

He points that some pockets of strength “or less weakness perhaps” have emerged, especially in the futures market where, of the big US indices it is the tech-heavy Nasdaq that is holding up better than the rest, “as investors there hold their nerve, but perhaps some of the early moves today will be reversed if a more optimistic tone prevails into this afternoon and next week”.

10.35am: Cryptos join sell-off

The FTSE 100 has pared the worst of its early losses, but is still down over 190 points to under 7,118, a fall of 2.6%.

Still, only nine of the blue chip index’s consituent companies is in positive territory, with over 20 of the rest trading down more than 4%, though only three down more than 7%.

While cryptocurrencies were recently benefitting from being seen as a hedge against inflation, it does not seem that investors are viewing them as a equities hedge.

‘King coin’ Bitcoin has skidded over 6% lower over 24 hours to US$54,840, its lowest in over a month and down 20% from its recent record highs.

Ethereum, the second largest coin, dropped 7% to US$4,063.84, while the biggest faller was Floki, well known to anyone who pays attention to London Underground adverts, is down over 20% to US$0.00000001479.

9.27am: Direction of travel – downwards

Travel stocks are unsurprisingly taking the brunt of investor fear as the UK quickly bans flights from six countries to try and limit the consequences of the new B.1.1.529 COVID variant emerging.

This ‘Nu’ strain has 32 mutations in its spikes, which is reported to make it potentially much more transmissible (which would hike the herd immunity threshold) and could help it evade immunity (which could require new variant vaccines).

British Airways owner IAG (LSE:IAG) plunged 15% at the start of trading and is still down 11%, while engine maker Rolls-Royce (LSE:RR.) has sputtered 9% lower and aeroplane components maker Melrose Industries (LSE:MRO, OTC:MLSPF) has fallen almost 7%.

Holiday Inns operator Intercontinental Hotels (LSE:IHG) PLC and Premier Inn owner Whitbread PLC (LSE:WTB) are both down more than 5%.

READ: Airlines hammered as new Covid-19 variant causes “deep concern”

Other fallers include events and exhibitions operator Informa PLC, oil giants BP PLC (LSE:BP.) and Royal Dutch Shell PLC (LSE:RDSB) as crude prices have sunk, along with banks Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG).

Other European indices are also roiling, with Germany’s DAX down 3.6% initially and now 3%, the CAC in Paris off by 4.5% early doors but coming back in to trade down 3.7%.

Neil Wilson at Markets.com says: “But the major bourses are only back to where they traded in Oct, the point when they were just picking up some momentum after the Aug-Sep decline, which if you recall had something to do with a Covid variant that was spooking investors: Delta.

“The quick reaction to banning travel from affected regions is in sharp contrast to the way things were handled previously with Delta, and offers some encouragement.”

He says banks are down on lower yields and fears for economic outlook, while WTI crude being down 14% from its peak and Brent crude down to $78, about 9% from recent peak.

Ocado Group PLC (LSE:OCDO) was the only riser in early trade, while it has since been joined by Royal Mail PLC (LSE:RMG) on the Footsie, as investors anticipate a potential lockdown.

Outside the blue chips, Just Eat Takeaway.com NV (LSE:JET, NASDAQ:GRUB) is a notable riser, for the same reasons, along with

Plus500 Ltd (LSE:PLUS), AO World PLC, Games Workshop Group, Domino’s Pizza Group PLC and CMC Markets Plc, which all did well in previous lockdowns, and looking across the Atlantic investors were having similar thoughts about US lockdown winners Zoom Video Communications Inc (NASDAQ:ZM) and Peloton Interactive (NASDAQ:PTON).

8.36am: New COVID variant leads to 200-point drop

The FTSE 100 dropped over 250 points or 3.5% to 7,057 in early trades Friday morning amid worries over a deadly new Covid variant from South Africa.

The UK has taken a “safety first” approach, according to transport secretary Grant Shapps, by placing six countries on its red list to restrict travel.

Nevertheless, fear of the economic carnage of a further lockdown sent the markets plunging, with Asia also in panic mode.

“The absence of a lead from Wall Street, closed for the Thanksgiving holiday, left investors to ponder the latest strain of the Coronavirus variant which in turn has led to a rather black Friday,” said Richard Hunter, head of markets at Interactive Investor.

“Detected in areas such as South Africa and Hong Kong, the combination of mutations has already led to travel restrictions alongside the possibility of further lockdowns. The news follows a similarly concerning trend in Europe, and Asian markets found themselves under strong selling pressure overnight.

“Inevitably this will dampen sentiment generally until such time as the strength of the variant can be assessed and, in the meantime, further pressure is likely to track shares in the likes of the airline and hospitality sectors. With the “new normal” yet to be established post-pandemic, the theme will continue to run for some time yet.”

6.50am: FTSE 100 set for sharp drop

The discovery of a new variant of the Covid-19 coronavirus has proper put the wind up stock markets.

Spread betting quotes indicate the FTSE 100 will tumble 128 points at the outset to 7,182, with oil companies likely to be leading the retreat as oil prices plunge in the wake of the news from South Africa.

“Asian stock markets are under heavy selling pressure this morning with investors spooked by the emergence of a heavily mutated variant of Covid-19 in South Africa, lovingly called B.1.1.529. The UK has paused flights from South Africa and five other neighbouring countries, and we can expect more of the same elsewhere, the complacency seen with the emergence of delta in India being a lesson harshly learned. Two cases with the new variant have already been detected in Hong Kong today. Headlines are also floating around this morning about tightening virus restrictions in parts of China,” said Jeffrey Halley at OANDA.

“The one bull in the China shop that could truly derail the global recovery has always been a new strain of Covid-19 that swept the world and caused the reimposition of mass social retractions. All we know so far is the B.1.1.529 is heavily mutated but markets are taking no chances, equities are falling, haven currencies such as the US Dollar, Japanese Yen and Swiss Franc are rallying, commodity currencies such as the CAD, AUD and NZD are being sold, US 10-year bond yields have moved sharply lower, and oil has slumped. USD/ZAR and USD/MXN are 1.0% higher signalling Asian FX will be under pressure today. In other words, a classic risk-off, flight to safety move,” he added.

US markets were closed yesterday for Thanksgiving – its unlikely they were giving thanks to overwhelming adherence to the wearing of masks to check the spread of the coronavirus – but are expected to plunge when they reopen today.

Meanwhile, in Asia this morning, Japan’s Nikkei 225 is off 768 points at 28,731 while in Hong Kong, the Hang Seng is down 565 points at 24,175.

Domestically, a quiet day is in prospect unless you plan to blow your wages on the hyperbole festival that is Black Friday.

Sofa seller ScS Group PLC (AIM:SCS) has contrived to hold its annual general meeting on one of the busiest days of the year for retailers.

When last we heard from ScS it was bouncing back from the lockdown well, with gross sales in the 53 weeks to the end of July up 21% year-on-year.

Since the end of July, trading had been in line with expectations, the company said in early October, with like-for-like order intake up 11.9% on a two-year like-for-like basis in the first nine weeks of the new financial year; one-year like-for-like order intake was down 21.0%, reflecting the release of pent-up demand after the end of the first lockdown in 2020.

Around the markets

Sterling: US$1.3299, down 0.23 cents

10-year gilt: 0.970%, down 3.21 basis points

Gilt: US$1,798.10 an ounce, up US$13.80

Brent crude: US$78.89 a barrel, down US$2.03

Bitcoin: US$57,954, down US$880

Ethereum: US$4,439, down US$61

6.50am: Early Markets – Asia / Australia

Shares in the Asia-Pacific region slumped on Friday following the World Health Organization’s statement on Thursday that they are monitoring a new COVID-19 variant with “a large number of mutations”.

China’s Shanghai Composite fell 0.56% and Hong Kong’s Hang Seng index slipped 2.66%.

The Nikkei in Japan slumped 2.53% while South Korea’s Kospi declined 1.47%.

Australia’s S&P/ASX200 closed 1.73% lower at 7279.3 points with travel stocks diving amid concerns of resurgent COVID-19 cases.


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