The panic situation in the global stock market after discovery of new variant in South Africa is simulating the 2020 crash of the Wall Street.
- South Africa registers over 100 cases of the Omicron variant declared as “matter of concern” by medical authorities.
- Investors reflect panic, Wall Street records biggest single day crash in months.
- Travel and hospitality once again stand threatened; Netflix, Zoom gain from the turbulence.
- Poor liquidity following Thanksgiving season increases concern for the U.S. economy.
Friday marked the worst day of the year for the stock market as the news of new COVID-19 variant from South Africa caused panic. The newly discovered variant has been named “Omicron” and has been declared as the “serious matter of concern” by medical authorities like WHO. Following the news of the outbreak and a few cases in Europe and Israel, countries such as U.S., U.K., Germany, Italy and others resorted to travel bans from specific nations, the impact of which was witnessed on the stock market.
U.S. recorded its worst market drop of the year as the Dow Jones Industrial Average slipped to 905.04 points, closing at 34,899.34. The shock was also registered on Nasdaq Composite that dropped down to 15,491.66 after registering a 2.23% slip. S&P 500 on the other hand lost 2.27%, plummeting down to 4,594.62.
Stock market in turbulent state after news of new COVID-19 variant
The panic is not just confined to the Wall Street. Friday registered a 2% drop in Japan’s Nikkei 225 and Hong Kong’s Hang Seng index. Further, a 4% drop was registered in Germany’s Dax index while Europe’s continent-wide Stoxx plummeted by 2.83%.
Oil prices too plummeted, breaking below $70 per barrel, registering a 12% drop in U.S. crude futures. Among the hardest hit market players were the travel and cruise stocks. Carnival Corp recorded an 11% drop while Royal Caribbean was down by 13.2%.
Airlines too suffered a market fallback following the news of rise in the COVID-19 daily cases and deaths once again. United Airlines registered a 9% drop followed by American Airlines plummeting by 8.8%. Marriott International dropped by 6.5% and Boeing lost more than 5%.
Market simulates 2020 sentiments- Panic and fear-led predictions
As several countries in the world signal towards imposing another lockdown, investors react in anticipation.
The fear of slowing economy paired with global supply chain crisis led to 3.9% drop for Bank of America and 2.7% for Citigroup. Other players associated with the global economy also suffered a setback on the market. Energy stocks reverted the market sentiments after crude price declines leading to 2.3% drop for Chevron.
This is also the result of market predictions that the central banks might soon hike the interest rates given situation of inflation in the U.S. Analysts have warned that the situation can be worsened due to poor liquidity as a result of Thanksgiving season in the country.
However, some industries stood out to win from the market panic. Zoom Video and Peloton recorded 5% rise following the lockdown and thus, work from home prospects.
The biggest winners of all, however, were the vaccine manufacturers. With the news of COVID-19 outbreak making a massive rebound in South Africa and West, investors once again placed their bets on pharma stocks. A whopping 20% surge for Moderna stocks and 6.1% for Pfizer were recorded on Friday.
In the words of Paul Hickey from Bespoke Investment Group, “it’s important to stress that very little is known at this point about this latest strain, including whether it can evade vaccines or how severe it is relative to other mutations. Therefore, it’s hard to make any informed investment decisions at this point.”
“Historically speaking, chasing a rally or selling into a sharp decline (especially on a very illiquid trading day) rarely ends up being profitable, but that isn’t stopping a lot of people this morning.”