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Stocks sink on fears over new coronavirus strain | Financial Markets

Stocks, US Treasury yields and oil sink as new COVID-19 strain rattles markets.

By Sunil JagtianiBloomberg

Published On 26 Nov 2021

Stocks, Treasury yields and oil sank Friday while the yen jumped as a new Covid-19 strain discovered in southern Africa sent a wave of caution across global markets.

An Asia-Pacific equity gauge was set for the worst slide since March, with Japan and Hong Kong underperforming and travel shares among the biggest decliners. U.S. and European futures fell and the 10-year Treasury yield dropped to 1.56{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}.

The World Health Organization and scientists in South Africa are studying the recently identified variant described as very different to previous versions and of serious concern. The U.K. and Israel banned flights from South Africa and some neighboring countries. Hong Kong confirmed two cases of the strain.

The dollar was at a 16-month high, while South Africa’s rand weakened and commodity currencies retreated. Crude shed 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and gold rose. U.S. markets, closed Thursday for Thanksgiving, will have a shortened Black Friday session.

The detection of the strain comes on top of concerns in markets about high inflation and the prospect of quicker exit from ultra-loose monetary settings. Global shares are up about 16{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} this year, weathering a plethora of risks after investors poured almost $900 billion into equity exchange-traded and long-only funds in 2021 — topping the combined total from the past 19 years.

“It’s a scary headline” about the virus variant, so it may have caused a knee-jerk reaction, said Kyle Rodda, an analyst at IG Markets Ltd. He added that “North America off the desks means there’s a wall of buyers missing” and that thinner markets make for more pronounced moves.

Variant ‘playbook’

December futures on the Cboe Volatility Index, a gauge of implied equity swings for the S&P 500, advanced as traders braced for turbulence when U.S. markets reopen.

Justin Tang, head of Asian research at United First Partners, pointed out that “the world has gone through this before with delta,” adding “there is already a playbook for such situations” and that “mutations are expected and not something unknown.”

Meanwhile, Goldman Sachs Group Inc. economists said they expect the Fed to tighten policy faster than previously anticipated, including doubling the pace at which it tapers bond purchases to $30 billion a month from January. They see an interest-rate liftoff from near zero in June.

In China, regulators have asked Didi Global Inc.’s top executives to devise a plan to delist from U.S. bourses, people familiar with the matter said. That may revive fears about Beijing’s intentions for its giant technology industry. A gauge of Chinese tech stocks slid.

The Chinese economy continued to slow in November with car and homes sales dropping again as a housing market crisis dragged on, according to Bloomberg’s aggregate index of eight early indicators.

For more market analysis, read our MLIV blog.

Here are some key events this week:

  • Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event. Thursday
    Some of the main moves in markets:

Stocks

  • S&P 500 futures fell 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} as of 5 a.m. in London. The S&P 500 rose 0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on Wednesday
  • Nasdaq 100 futures fell 0.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. The Nasdaq 100 rose 0.4{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} on Wednesday
  • Japan’s Topix index dropped 2.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • Australia’s S&P/ASX 200 index fell 1.7{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • South Korea’s Kospi index shed 1.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • Hong Kong’s Hang Seng index declined 2.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • China’s Shanghai Composite index lost 0.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • Euro Stoxx 50 futures tumbled 2.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Currencies

  • The Bloomberg Dollar Spot Index rose 0.2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • The euro was at $1.1223, up 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • The Japanese yen was at 114.72 per dollar, up 0.6{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • The offshore yuan was at 6.3934 per dollar, down 0.1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Bonds

  • The U.S. 10-year Treasury yield fell eight basis points to 1.56{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}
  • Australia’s 10-year bond yield fell nine basis points to 1.78{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Commodities

  • West Texas Intermediate crude fell 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} to $76.06 a barrel
  • Gold was at $1,797.75 an ounce, up 0.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

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Oil selloff intensifies on Covid fears and risk of US-China intervention

US crude tumbled to a fresh seven-week low on Friday, settling at $76.10 a barrel. The slide is good news for American drivers hurt by the seven-year high in gasoline prices — a crunch that has soured consumers’ views on the US economy.

“We will definitely see some pricing relief on gasoline at the pump,” Tom Kloza, president of the Oil Price Information Service, told CNN on Friday, adding that the relief will be “feather-like as opposed to plunges.”

After a relentless rise, the national average gas price has finally leveled off at $3.41 a gallon, according to AAA. That’s roughly flat from a week ago.

“It looks for now as though the 2021 peaks have been established,” Kloza said.

Lockdown jitters

Unfortunately, one of the catalysts for Friday’s tumble in the market is another ominous development on the Covid front: Austria announced plans Friday to impose a national lockdown, the first in Europe this fall, in a bid to reverse a spike in Covid-19 cases.

The lockdown is raising fears in the oil market of tough new health restrictions elsewhere that will slow the economic comeback and eat into energy demand.

“The demand signals today are overwhelmingly bearish,” Louise Dickson, senior oil markets analyst at Rystad Energy, wrote in a note on Friday. “The risk is real in Europe, especially if Austria’s move to lockdown has a domino effect across the continent. If Germany follows suit, sub-$80 price levels may be here to stay.”

Will China and America team up?

Beyond the lockdown fears, oil markets remain jittery over the specter of the United States and China teaming up to intervene in the previously red-hot energy markets.
Since crashing to negative-$40 a barrel in April 2020, US crude has climbed as much as $125 a barrel because supply simply hasn’t kept up with demand. OPEC and its allies, known as OPEC+, have only gradually increased production. US oil companies haven’t been in a rush to add supply either.

A coordinated release from two of the world’s biggest energy consumers would have a bigger impact than if the Biden administration acted alone to tap the Strategic Petroleum Reserve.

Officials in China put out a statement on Friday suggesting that a release of barrels from the country’s emergency reserve is on the table.

Americans say they hate the economy but act like they love it

“The bureau is pushing forward with crude oil release-related work at the moment,” authorities that oversee China’s strategic oil reserves said in a statement to CNN.

According to a readout published by the White House, US President Joe Biden and Chinese President Xi Jinping discussed during their virtual summit this week the “importance of taking measures to address global energy supplies.”

A coordinated release by the United States and China could also be used as a bargaining tool to get OPEC+ to open up the taps, after months of refusing to do so.

“There is firepower with a concerted effort,” said Robert Yawger, director of energy futures at Mizuho Securities.

‘Short-term fix’

Still, this is not a long-term solution, as releasing barrels from emergency reserves doesn’t solve the underlying supply-demand mismatch. And these emergency reserves hold a finite amount of oil — crude that is typically reserved for supply shocks, not surging demand amid an economic recovery.

Releasing barrels today leaves the reserves with less of buffer for the next crisis, whether it’s a hurricane, a conflict in the Middle East or another supply shock.

Goldman Sachs reiterated in a new report to clients on Thursday that a coordinated release would “only provide a short-term fix to a structural deficit.”

Why the Biden administration is reopening oil and gas leasing in the Gulf of Mexico

The Wall Street bank argued this coordinated release is now “fully priced in,” meaning the impact to markets has already happened.

“In fact, if such a release is confirmed and manages to keep oil prices depressed in the context of low trading activity into year-end, it would create clear upside risks to our 2022 price forecast,” Goldman Sachs strategists wrote.

In other words, at least some on Wall Street are already looking past this emergency intervention — before it even happens — and predicting higher prices ahead.

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Larry Fink fears for energy transition, warns of market arbitrage

LONDON — Larry Fink, chair and CEO of BlackRock, suggests the so-named electrical power changeover toward greener electric power has to be radically rethought and blasted oil companies for offering out to non-public organizations.

Speaking at the Green Horizon Summit chaired by CNBC’s Julianna Tatelbaum in the course of the COP26 local climate conference in Glasgow, Scotland, Fink praised public companies for increasing their reporting of emissions but criticized oil corporations for marketing elements of their businesses to non-public traders, and reported it could develop big marketplace arbitrage.

“We are unable to just ask community organizations to transfer ahead without having the rest of modern society. It can be heading to generate the largest funds marketplace arbitrage. We are observing that extra hydrocarbons have been marketed to non-public organizations in the previous number of several years than virtually any time at any time. That isn’t going to adjust the entire world at all. It in fact makes it, the planet even even worse, because it moves from community disclosed corporations to opaque private enterprises. So, the mission is failing if that is all you’re executing,” he said.

Arbitrage refers to market inefficiencies that make it possible for investors or providers to profit.

Some oil firms are marketing their much more polluting assets to non-public organizations, generating more of a green narrative for shareholders. But those people assets even now exist, and are a lot less clear in non-public palms, Fink reported. “That is not switching to a net-zero entire world. That is window dressing, which is greenwashing,” he stated.

One particular resolution, Fink mentioned, is to generate new monetary autos for the spin-off of oil belongings, with an electrical power company then committing all of the proceeds of the sale to green technological innovation. “We need to have to create these styles of motor vehicles like we’ve done in the course of [the] monetary disaster with banks, we need to have to generate new cars, new imagined processes,” he mentioned.

BlackRock, the world’s most significant dollars manager, is “doing work with them, not in opposition to them,” in conditions of its partnership with oil corporations, Fink said. “The key for our hydrocarbon businesses, they want to speedily go to a additional decarbonized business enterprise product. But at the exact time, they are the range one particular purveyor of electricity, of gas and oil, in a culture that even now is fully dependent on that,” he acknowledged.

Go through a lot more about clear energy from CNBC Pro

“We need to have to reimagine how we could fast deploy new capital into the greening of the earth, but not the avoidance of hydrocarbons in the quick operate or we are going to have $120, $140 oil, and that’s not a fair or just transition,” Fink added.

The producing world

Fink warned that rising nations “will not occur along mainly because they can’t afford to pay for it,” in conditions of going toward environmentally friendly electrical power. “We have to have a reasonable and just changeover. If we are not receiving a truthful and just transition we are heading to generate more polarization in the entire world, extra political uncertainty,” he warned.

He explained the Environment Bank and the Intercontinental Monetary Fund would have to have to be reimagined to ensure adequate dollars goes to producing nations around the world to help them deal with local climate improve. “If we are really serious about elevating the quantity of funds that is heading into the rising environment, suitable now it truly is only about $150 billion, and all the estimates are that we are likely to have to get to $1 trillion a 12 months for the subsequent 30 several years to seriously go the whole globe together with the rising planet to a extra sustainable platform,” he explained.

“I’m urging the owners of those institutions, the equity proprietors, and that is all the main international locations of the globe to concentrate on how do we reimagine these establishments,” he added. 

BlackRock explained it experienced lifted $673 million for a local climate-targeted infrastructure fund for assignments in rising marketplaces, for each a Reuters report Tuesday. The Weather Finance Partnership has backing from the governments of Japan, France and Germany.

BlackRock experienced specific $500 million of financial investment, so the fund was oversubscribed, Fink explained to the COP26 party. “We could raise a large amount far more and this is a great instance of leveraging what community funds can do,” he explained.

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Stocks advance as debt ceiling deadline fears abate

Stocks advanced Thursday, with investors cheering developments in Washington as lawmakers reached an agreement that would temporarily avert a government default by mid-month.  

The three major indexes extended gains after Senate Majority Leader Chuck Schumer said Thursday morning that lawmakers had reached a deal to extend the government’s debt limit through the beginning of December. Such a move would offer time to prevent a government default that many pundits said could come as soon as around Oct. 18. 

The issue of the debt ceiling has been a focal point for corporate leaders and market participants alike. Earlier Wednesday, President Joe Biden met with top business leaders including JPMorgan CEO Jamie Dimon and Nasdaq CEO Adena Friedman, who urged lawmakers to raise the debt limit and prevent a government default they warned would be catastrophic to the U.S. economy. Treasury Secretary Janet Yellen also told CNBC she expected a government default would cause a recession.

“The debt ceiling is one of many factors right now that we think are causing these gyrations in the markets. Certainly the market will take some comfort when there is a deal, when it is more formalized,” Yung-Yu Ma, chief investment strategist for BMO Wealth Management, told Yahoo Finance. 

The ongoing debt ceiling debate has been just one of a number of concerns to the market in recent weeks, which have all come together to catalyze volatility across risk assets. 

In addition to concerns over the debt limit, “markets are looking for some resolution, or at least an end in sight to the supply chain issues, the inflation pressures that are building,” Ma added. “The markets are also starting to look toward the November meeting of the Fed, and hoping that the Fed is not going to show excessive increases in future interest rates as well … So several things are going on.”

A spike in energy and commodity prices has also weighed on investor optimism, reinforcing the persistent trend in rising price pressures across the global economy. 

U.S. crude oil futures gained on Thursday to reverse some of Wednesday’s losses, after Bloomberg reported the U.S. Energy Department said it did not plan to release crude oil from the government strategic petroleum reserve at this time. A day earlier, the Financial Times had reported that U.S. Energy Secretary Jennifer Granholm had not ruled out tapping the SPR as one means to try and bring prices in check. 

“The surge in energy prices is just going to make all the supply chain issues that we’ve been experienced over the past year even worse. I suspect that the supply chain issues are going to get worse before they get better,” Troy Vincent, senior market analyst at DTN, told Yahoo Finance Live.

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11:22 a.m. ET: Stocks extend gains

The three major indexes added to gains Thursday mid-morning after Senate Majority Leader Chuck Schumer said the chamber had reached an agreement to extend the debt limit into December avert a government default this month. 

Each of the S&P 500, Dow and Nasdaq were up at least 1.3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} in intraday trading, and the small-cap Russell 2000 outperformed with a gain of 2{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}. The materials, healthcare and consumer discretionary sectors led the way higher in the S&P 500, and all 11 major sectors were in positive territory during the session.

Nearly every component in the 30-stock Dow traded higher on Thursday. Materials company Dow Inc. and Nike outperformed, gaining more than 3{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} and 2.5{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}, respectively. 

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9:32 a.m. ET: Stock futures jump, Dow adds 350+ points, or 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

Here were the main moves in markets as of 9:32 a.m. ET: 

  • S&P 500 (^GSPC): +37.28 (+0.95{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 4,405.18

  • Dow (^DJI): +372.34 (+1.07{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 34,789.33

  • Nasdaq (^IXIC): +150.61 (+1.04{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 14,652.31

  • Crude (CL=F): -$0.47 (-0.61{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $76.96 a barrel

  • Gold (GC=F): -$8.90 (-0.51{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,752.90 per ounce

  • 10-year Treasury (^TNX): +2.8 bps to yield 1.552{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

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8:55 a.m. ET: Pfizer asks FDA to authorize COVID-19 vaccine for children ages 5-11 

Pfizer (PFE) and BioNTech (BNTX) on Thursday said they were submitting data to the Food and Drug Administration to seek emergency use authorization of their COVID-19 vaccine for children between the ages of 5 to 11. Shares of both drugmakers were higher in early trading. 

The FDA previously set a tentative advisory committee meeting to discuss the vaccine for pediatric use on Oct. 26. So far, the Pfizer vaccine has received full approval for use in individuals 16 and older, and emergency use authorization for those aged 12 to 15.  

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8:35 a.m. ET: Weekly jobless claims fell more than expected last week

New weekly unemployment claims posted a sharper than expected drop last week, with impacts to the labor market relating to Hurricane Ida and the Delta variant beginning to recede.

Initial jobless claims totaled 326,000 for the week ended Oct. 2, the Labor Department said Thursday. This came in below the prior week’s 364,000, which was upwardly revised from the 362,000 previously reported.

As of the week ended Sept. 18, about 4.2 million individuals were claiming benefits across all unemployment programs, compared to 5 million during the prior week. These figures have come down sharply in recent weeks in large part due to the expiration of crisis-era federal unemployment programs on Sept. 6. Continuing jobless claims totaled 2.714 million during the week ended Sept. 25, reaching the lowest level since March 2020. 

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7:25 a.m. ET Thursday: Stock futures jump, Nasdaq futures gain 1{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996} 

Stocks headed for a higher open Thursday morning. Here were the main moves across markets: 

  • S&P 500 futures (ES=F): +39.25 points (+0.90{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,393.25

  • Dow futures (YM=F): +269 points (+0.78{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 34,560.00

  • Nasdaq futures (NQ=F): +167.00 points (+1.13{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 14,926.00

  • Crude (CL=F): -$1.12 (-1.45{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $76.31 a barrel

  • Gold (GC=F): +$2.70 (+0.15{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to $1,764.50 per ounce

  • 10-year Treasury (^TNX): -0.3 bps to yield 1.521{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}

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6:05 p.m. ET Wednesday: Stock futures hold higher

Here’s where markets were trading Wednesday evening:

  • S&P 500 futures (ES=F): +3.5 points (+0.08{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 4,357.5

  • Dow futures (YM=F): +25 points (+0.07{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}), to 34,316.00

  • Nasdaq futures (NQ=F): +15.5 points (+0.11{21df340e03e388cc75c411746d1a214f72c176b221768b7ada42b4d751988996}) to 14,774.50

NEW YORK, NEW YORK - SEPTEMBER 16: People walk by the New York Stock Exchange (NYSE) on September 16, 2021 in New York City. Despite a rise in retail sales, the Dow slipped lower on Thursday as investors continue to have concerns from the Delta variant and news of a slight rise in jobless claims. (Photo by Spencer Platt/Getty Images)

NEW YORK, NEW YORK – SEPTEMBER 16: People walk by the New York Stock Exchange (NYSE) on September 16, 2021 in New York City. Despite a rise in retail sales, the Dow slipped lower on Thursday as investors continue to have concerns from the Delta variant and news of a slight rise in jobless claims. (Photo by Spencer Platt/Getty Images)

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter