The new variant of coronavirus detected in South Africa and the increasing rate of infections are setting off alarms in the markets. The Ibex 35 fell 4% in the mid-session this Friday and was below 8,500, the largest collapse of the Spanish index in almost a year and a half, specifically since June 11, 2020, when more of 5%. The rest of the European parks also show considerable losses: Frankfurt, London, Milan, Paris and the Eurostoxx 50, which groups the 50 most important companies among the countries of the eurozone, sink by 3%, following the wake started by the markets Asians.
In the half session, almost all the values were dyed red in the Madrid selective. The most penalized are those related to tourism and travel. IAG plummets more than 13%, Amadeus 8%, Meliá 7% and Aena 6%. Banks also register sharp falls: BBVA, Santander and Sabadell lose around 5%. For its part, Repsol suffered a similar drop due to the hit of more than 4% that affected the price of oil and gas. Only Cellnex, a wireless telecommunications company, held in the green (0.58%).
The director of Financial Investments of the Mutualidad de la Abogacía, Pedro del Pozo, emphasizes that the market is at the mercy of two variables: inflation and the coronavirus. “An asset valuation as high as the last few weeks has to be supported by long-term business profit. The coronavirus is an obstacle in the line of this strategic thinking, because it affects the possibility that entrepreneurs improve their profits, ”the analyst comments by phone.
However, it is too early for Del Pozo to draw conclusions, as early news about the new variants is often disappointing regarding their resistance to vaccines. Justin Tang, Head of Asian Research at United First Partners, also curbs pessimism fueled by rising infection numbers. “Since the world has been through this before with the Delta variant, there is already a roadmap for these situations, even if the new variant stays longer,” he said in statements collected by Bloomberg.
Thursday’s session was marked by the reduction in the volume traded due to the closing of the financial markets in the United States for the Thanksgiving holiday, while this Friday they will only open half a session. S&P 500 and Nasdaq futures are down 1% to 2%. The session in Asia has been very negative this Friday, with the Nikkei closing down 2.53% on fears that the new variant of coronavirus will slow down the global economic recovery. In addition, the yen soared 1% against the dollar, while the South African rand fell to its lowest level in a year.
The new mutation of covid-19, called B.1.1.529, in addition to deteriorating investor sentiment, worries the World Health Organization, which has convened a meeting of emergency experts for this Friday to discuss whether to declare the new strain as a variant of concern. Scientists have not yet ruled on the variant and do not know whether it can evade immune responses. So far, around 100 cases have been detected in South Africa and another two in Hong Kong. Israel and the United Kingdom have banned the entry of travelers from seven southern African countries – South Africa, Lesotho, Botswana, Zimbabwe, Mozambique, Namibia and Eswatini – and the EU has warned that it will make a decision in the next few hours. This verdict will be crucial for the future of markets that are hypersensitive to any new health risk.
On the other hand, the price of a barrel of Brent quality oil, a reference for the Old Continent, stood at a price of 78 dollars, after falling 4.5%, while Texas stood at 74 dollars, after falling 5%. Investors have their sights set on the OPEC Plus meeting scheduled for next week, where oil-exporting countries will decide whether to maintain their commitment to increase joint production by 400,000 barrels per day per month. The meeting will take place after the United States announced on Tuesday that it will release 50 million barrels of oil with the aim of lowering prices and addressing the mismatch between demand and supply.
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