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Markets Around The World Are In The Red Today as A Reaction Over New Covid-19 Variant & The Yen Drops Despite Retail Expectations

DOW, S&P 500 sink as markets wary over new COVID-19 variant

The Dow Jones and S&P 500 suffered significant declines on Friday, as markets reacted to the news that a new strain of the COVID-19 virus had been discovered.

It was reported that the variant which was found in South Africa, is potentially vaccine-resistant, and this news has sent shockwaves through markets.

In a statement regarding the new discovery, WHO’s Technical lead on Covid-19, Maria Van Kerkhove stated that, “We don’t know very much about this yet. What we do know is that this variant has a large number of mutations. And the concern is that when you have so many mutations, it can have an impact on how the virus behaves”.

The Dow fell by as much as 1000 points, with the S&P 500 2.27% lower as of writing.

Gold prices also spiked and were up by as much as $35 on the news before falling back to an $8 gain at $1,792.30.

UK’s FTSE 100 suffers biggest fall in 2021

In the United Kingdom, the FTSE 100 suffered its biggest intraday fall of the year, as it too reacted to the news of the new COVID-19 variant.

The news prompted the UK government to temporarily suspend flights to and from six countries in the southern African region.

Regarding the travel suspension, UK Health Secretary Sajid Javid said that “More data is needed but we’re taking precautions now. From noon tomorrow six African countries will be added to the red list, flights will be temporarily banned, and UK travellers must quarantine”.

💡 Central Banks, How will they react?
Geoffrey Yu, senior market strategist at BNY Mellon, told CNBC’s “Squawk Box Europe” on Friday that some corners of the market might believe that the news of this new variant would give the Federal Reserve reason to pause on its normalization of monetary policy, though he didn’t necessarily agree with that view.

Yu said that the recent resurgence of Covid cases in Europe, even before the news of this latest variant emerged, showed that “we are still going to be dealing with this for some time, and there will be rounds of risk aversions that will hit markets, due to concerns over the pandemic.”

Some of the countries impacted were South Africa, Namibia, Zimbabwe, Botswana, Lesotho and Eswatini.

London’s FTSE 100 closed 3.64% lower to end the week.

Yen drops, despite expectations of retail sales growth

The Japanese Yen was also moved by today’s news, with the safe haven currency falling, despite strong economic forecasts.

After trading at a high of 115.29, USDJPY fell to an intraday low of 113.05, its lowest level in 2-weeks.

The drop saw all gains during that period engulfed by today’s decline, and rates now look set to break below the long-term support of 112.

💡 More on that
The Japanese Yen managed to pull back from a 4-year low against the US Dollar today. Although crude oil continued higher, US Treasury yields pulled back. 10-years retreated to 1.63% from a high above 1.68% in the US session. Then a strong local PMI came out, printing at 54.2 against a prior print of 53.2, further boosting the Yen.

Friday’s move comes despite analysts publishing expectations for Japanese retail sales to grow for the first time in three months once official figures for October are released.

In addition to sales, Industrial output was also expected to expand by 1.8% from September to October, rebounding from a 5.4% fall the previous month.

“It’s not what we do once in a while that shapes our lives. It’s what we do consistently.”

– Tony Robbins

Eliman Dambell

Senior Market Analyst