Fear gripped globally as the news about the new variant of coronavirus Omicron outbreak spread. Globally equities and oil prices had the most brutal hit, continuing for more than a year as the virus had a sell-off in companies most exposed to the corona outbreak while dashing for a safe haven. According to the World Health Organization, the latest strain, Omicron, is not to be underestimated as it is leading to reinfection.
The Financial Times Stock Exchange all-world index was down by 2.2% at the New York close, which reflected a decline in US, European and Asian markets. Crude oil is a benchmark on both sides of the Atlantic. Crude oil settled down 10%, one of the most infamous falls since April 2020.
Head of International fixed income at NatAlliance Securities, Andrew Brenner, commented that it was not like the usual Friday where things were quiet. Globally, both equities and bonds retreated. Wall Street’s Standard & Poor 500 index was down to 2.3%, European Stoxx 600 dropped 3.7%, and Morgan Stanley Capital International’s broad Asia-Pacific index declined 1.7%.
As the concern over Omicron grew, British Airways parent company International Airline Group’s shares, German airline carrier Lufthansa and aircraft manufacturer Airbus declined more than 10%. Even the American airline carrier was not spared. The US airlines United, America, and Delta shared a similar fate.
The fate of coronavirus vaccine makers was quite different, with Modern ascending to 21%, while Pfizer soared 6%. Other companies that benefited from this pandemic situation were meal-kit company HelloFresh, grocery delivering company Ocado, and online fashion retailer Zalando.
The Omicron variant was initially identified in Botswana. The Omicron variant is the culprit behind the sudden increase of cases in Southern Africa for the last few weeks. Omicron is potentially deadly as it can spread more rapidly than the Delta variant, and the Covid-19 vaccines do not affect it. The WHO on Friday said that Omicron has a large number of mutations, and some of them might be dreaded. As a result, the European Union and the United Kingdom have imposed travel bans on a group of Southern Africa nations, and Israel has imposed a ban on South Africa.
On Black Friday, the beginning of the festive shopping season, for a limited trading session, the US Bonds and Stock Market were opened. However, according to the Investors, due to the short duration the market was open for, the trading volumes were thin in some markets, aggravating price fluctuation.
The nervousness was apparent in an array of market barometers which were closely watched. The expected volatility in Wall Street stocks measured in the Vix index rose over the next month from 10 points to 29 points on Friday, being one of the most notable increases since early 2021. As the investors turned to assets that generally were seen to carry less risk, the government debt increased. As a result, there was a fall to about 0.16 % points to 1.48% on the benchmark US 10-year Treasury note yield, making it the biggest fall of yield since March 2020.
On the worst day since March 2020, a widely watched junk bond exchange-traded fund, also known as the HYG ticker, fell by 0.7%. The derivative index offers protection from losses heading to its highest level in a year to an investor. Seeking shelter from bad news, the investors found the prices ascending for arranging compensation against companies who were defaulting on their debt. Even being not affected by the move, some investors are optimistic about bad news being circulated about the performance of certain stocks, looking at an opportunity to buy debts at a discounted price. One of the corporate bond portfolio managers said that there are many such holiday deals in the financial market.