Global Stocks Sell Off on New Virus Woes; Japanese Yen Surges
Global stocks waver Friday as concerning new Covid-19 variant hits South Africa, Hong Kong. Traders flee to JPY for safety.
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Principal Points
- Stocks globally endure increased selling amid uncertainty from a new Covid-19 variant
- Traders flock to the Japanese yen in search for safety, USD/JPY slips under 114.00
What’s Moving in the Markets?
Global stocks are selling off early Friday in every major market around the globe. Starting in Asia, the Hang Seng index in Hong Kong shed more than 2.5%. Further, US stock futures followed with their own drastic decline. More precisely, futures on the Dow Jones plunged over 900 points, or more than 2.5%. Also, S&P500 futures and Nasdaq futures dropped over 1% each.
Next in line, European bourses cracked right out of the gate. That said, the pan-European Stoxx 600 index lost more than 3% in early Friday deals. Moreover, Spain’s IBEX35 tumbled 3.5% with other major indexes in the old continent in the same red territory.
New Covid-19 Strain Weighs on Markets
The catalyst for the major selling pressure in world shares was the discovery of a new Covid-19 strain. First spotted in South Africa then Hong Kong, the B.1.1.529 variant is believed to be highly transmissible. In addition, health experts sound the alarm over a possibility that the virus could evade vaccines.
It is already found in several other countries, including one case in Israel and a few infections in Singapore. To this end, both countries along with a growing wave of others, are suspending travel to African nations.
What’s the Big Picture for Traders?
In search of a safe haven, market participants scrambled to find anything to protect their portfolios from the mounting selloff. In that context, perhaps the winner of the day could be the Japanese yen. While in many instances traders would prefer the US dollar, this time it was the yen to meet the demand for safety.
With this in mind, the Japanese yen rallied against most peers in the forex market. In detail, USD/JPY, which hit its inflection point yesterday and indicated a downturn was likely to happen, slipped more than 140 pips. More specifically, the USD/JPY pair traded at a multi-year high of 115.50 on Thursday. A day later, the exchange rate is lower by over 1% and is floating near 114.00 with a session low of 113.66.
The Japanese yen is among the few financial assets in the green today. On that note, other risky assets could endure heightened volatility as traders rush to find value across asset classes today.
What to Watch in the Markets?
Against this backdrop, the markets today are in for a ride. As European markets are heavily knocked, US stocks are slated for extreme jitters in the holiday-shortened session which closes at 1pm.
Cryptocurrency markets, in the meantime, are slightly giving in to the selling pressure. Bitcoin, for example, started the day with a session high of over $59,000. Currently, the original crypto token is floating near $55,000 apiece, about 6% lower on the day.
Ether, on the other hand, is also down on Friday. The Ethereum token peaked at a session high of $4,500. Upside momentum, however, quickly dried up and the second-biggest coin slipped near $4,000, lower by 9% on the day.