Global stock markets plunge sharply due to new coronavirus variant

(Patria) - Stock prices on global markets fell sharply last week as investor appetite for riskier investments waned after a new, highly contagious variant of the coronavirus was identified in South Africa.

On Wall Street, the Dow Jones fell 2 percent last week, to 34,899 points, while the S&P 500 dropped 2.2 percent, to 4,594 points, and the Nasdaq index fell 3.5 percent, to 15,491 points.

Until Friday, trading on stock exchanges was calm, but then markets were shaken by the news that a new variant of the coronavirus with a large number of mutations had been identified in South Africa.

There are fears it could be resistant to vaccines and more contagious than previous variants of the virus.

Because of this, many countries, including the EU, the UK, the US, and Brazil, have announced tightened border controls on travel from six southern African countries.

This unsettled investors who were already worried about the rapid spread of the coronavirus in Europe and the reimposition of lockdowns in some countries, such as Austria, reports Hina.

In Germany, the number of virus deaths surpassed 100,000 last week, Slovakia announced a two-week lockdown, and the Czech government ordered earlier closing of bars.

And this could slow the region's economic recovery from the coronavirus crisis.

"After news like this, you shoot first and ask questions later. Markets are assessing the risk of a possible further global wave of virus spread, if the vaccine proves ineffective. Hopes for reopening economies and countries could fade," explains Ray Attrill, a strategist at National Australia Bank.

Because of this, stock prices in the tourism and other sectors that would be most affected by renewed economic closures fell sharply, while demand rose for investments considered safer havens for capital in uncertain times, such as government bonds and certain currencies.

The VIX 'fear' index on the Chicago Board Options Exchange reached its highest level since early March on Friday, indicating that investors are increasingly hedging their portfolios against a possible further decline in stock prices.

"This is deja vu for maybe the eighth time. As we understand it, the spread of the new coronavirus variant could accelerate over the weekend. In such circumstances, many investors are afraid of new bad news related to this and do not want to hold riskier investments on Monday morning when markets reopen," says Keith Buchanan, portfolio manager at Global Investments.

On European stock exchanges, stock prices also fell sharply last week. The London FTSE index slipped 2.5 percent, to 7,044 points, while the Frankfurt DAX plunged 5.6 percent, to 15,257 points, and the Paris CAC fell 5.25 percent, to 6,739 points.

On the Tokyo Stock Exchange, the Nikkei index fell 3.45 percent, to 28,751 points.