Asian markets and oil prices fell while safe havens rallied on Friday over fears of a new Covid 19 variant that scientists warn could be more infectious than Delta and more resistant to vaccines, potentially causing a major blow to the global recovery.
The World Health Organization will hold a meeting later in the day to decide whether or not it should be designated a variant of interest or concern, and has caused Britain and Israel to ban all travel from the country and five others in southern Africa, due to the fact that 529 strain has been blamed for a surge in fresh cases in South Africa.
The WHO said that this variant has a large number of mutations that need to be further examined, as shown by early analysis.
The news hammered confidence in Asian markets, which were already under pressure as traders prepared for the Federal Reserve to tighten its monetary policy to fend off surging inflation.
On equity markets, Tokyo, Hong Kong and Mumbai were more than two percent off, while Sydney, Seoul, Singapore, Bangkok, Taipei, Manila, Mumbai, Wellington and Jakarta shed more than one percent. As investors fretted over the possibility that more restrictions would be brought in by governments, the firms linked to travel were among the worst affected.
Sydney-listed Qantas lost more than five percent, Hong Kong's Cathay Pacific shed four percent and Singapore Airlines lost more than three percent. Macau casino operators were also hammered in Hong Kong.
The price of oil was also sharply lower, with WTI off 2.5 percent, due to concerns about the impact on demand if new containment measures were introduced.
The selling comes as OPEC and other key producers prepare to meet next week to discuss output plans, with analysts saying that officials will be watching the developments as it could force them to re-evaluate their agreement to release more black gold.
The one bull in the china shop that could derail the global recovery has always been a new strain of Covid 19 that swept the world and caused the reposition of restrictions, said Jeffrey Halley, OANDA's senior vice president, Jeffrey Halley.
The flare-up of uncertainty has also sent safe-haven currencies up, with the yen being a go-to unit in times of turmoil.
The greenback gained two percent of its value against other units, including a two percent gain on the South African randAfrican rand and Mexican peso.
Kyle Rodda, of IG Markets, said that it was a scary headline about the virus, so it may have caused a knee-jerk reaction.
The fact that the US markets were closed for Thanksgiving and trade would be thinner Friday means that there is a wall of buyers missing meaning moves that would be accentuated.
Mutations are expected and not something unknown, he said.
As the Fed considers its next moves to fight inflation, it is sitting at three-decade highs and threatening the US recovery, traders are keeping a watch on it.
Some bank officials have flagged a faster pace of tapering its vast bond-buying programme, with a hike in interest rates possibly coming in mid- 2022.
A team at Goldman Sachs said that the increased openness to accelerating the taper pace may reflect both higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets.
The euro pound went up by 84.39 pence from 84.16 pence.
West Texas Intermediate: DOWN 2.5 percent at $75.64 per barrel.
Brent crude for the North Sea was down 2.8 percent at $79.90 per barrel.