Stocks, oil prices fall after South Africa raises alarm over possible travel restrictions

Stocks, oil prices fall after South Africa raises alarm over possible travel restrictions

Global equity markets and U.S. stock futures fell after South Africa raised the alarm about the possibility of new travel restrictions or other restrictions that could limit economic activity.

The market participants said that the global moves were likely amplified by thin trading volumes, which was why the U.S. stocks were set for a shortened trading session.

Stock-index futures lost ground, suggesting that the US markets could come under pressure when they are reopened. S&P 500 futures dropped 1.7%, while futures tied to the Dow Jones Industrial Average lost 2.1%.

Benchmark U.S. Treasury yields were lower compared to preholiday levels. Bond yields fell as prices rise, and the yield on the 10 year Treasury note fell by 0.099 percentage point to 1.545%.

Oil prices declined with front-month U.S. crude-oil futures dropping 5.5% to $74.13.

South Africa s government said Thursday it was considering new public-health restrictions to contain the new variant, dubbed B. Scientists believe that it has a high number of mutations that could make it more transmissible and allow it to evade some immune responses triggered by previous infection or vaccination. A South African traveler in Hong Kong has detected the variant. The South African randAfrican rand weakened sharply against the dollar, with $1 buying about 16.3 rand.

In Asia-Pacific, Hong Kong's benchmark Hang Seng Index was 2.7% lower, while Tokyo's Nikkei 225 closed down 2.5%. Australia s S&P ASX 200 pulled back 1.8%.

Rob Carnell, head of research and chief economist for the Asia-Pacific region at ING, said that everyone seems to be panicking about this new variant that is cropping up in South Africa.

It wasn't yet clear if the new strain would prove more infectious or deadly than the Delta variant, but investors were concerned about potential travel restrictions, and that broader lockdowns might be needed, according to Carnell, who said that in a scenario where current vaccines were ineffective.

There probably aren't that many people active in markets at the moment. He said that that's likely to be causing bigger movements than you might have expected.

Travel stocks were some of the biggest losers. Japan Airlines, ANA Holdings and Australia's Qantas Airways fell between 4.5% and 6.5%. The Japanese yen, which usually strengthens in times of rising market stress, gained against the dollar.

Covid is back on the table, says Takeo Kamai, head of execution services at CLSA in Tokyo. Although Japan has no confirmed cases related to the new variant, investors were concerned that it could push back the government's plans for a new variant, according to Kamai. Tokyo has recently said it would allow business travelers to come in for short-term business trips.

Technology stocks wilted after Bloomberg reported that China had asked Didi Global to devise a plan to delist in the U.S. The ride-hailing giant is considering going private partly to placate Chinese authorities, and that regulators in China have shares in SoftBank Group, whose Vision Fund is a major backer of Didi, fell more than 5% in Tokyo. Hong Kong-listed technology shares fell broadly, with heavyweight Tencent Holdings dropping around 3%.