Morning Minutes

New COVID Variant Sparks Big Capital Flows and Sharp Moves




Historically, Black Friday has been one of the quietest days of the year for US stock markets with many participants away and the market only open for a half day.

Not this year. Overnight the WHO announced that a new COVID variant with several mutations has been identified in South Africa sparking some countries to announce new travel restrictions. These announcements have sparked a selloff in travel related stocks (airlines, cruise lines, hotels, etc.) and has sparked a rally in stay-at-home and vaccine stocks. This news has completely overshadowed early anecdotal reports of strong in-person and online traffic for Black Friday sales.  

Overseas stock markets plunged overnight with the Dax, FTSE, Nikkei and Hang Seng all nosediving between 2.5% and 3.0%. US index futures are also under pressure this morning with Dow futures down 2.0% and NASDAQ futures down 1.0%.  

Commodities are under particular pressure today, driven down by uncertainty surrounding the impact of this new variant on the global economy. WTI crude oil is down 5.8% while copper is down 3.0%. On the other hand, forecasts for cold weather and winter storms in North America for this weekend have ignited a 4.7% rally for natural gas.

A flight to traditional safe havens and a sudden easing in inflation pressures has also been playing out today. The Japanese Yen is soaring 1.1% against the greenback, while gold has gained 1.2%, and the Swiss Franc is up 1.0%. US bonds have also been on the rise, pushing the 10-year treasury note yield down over 0.1% in a day back toward 1.50%.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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