July 7, 2022


With the news of detection of new and possibly vaccine-resistant coronavirus variant investors dashed towards safety of bonds, the yen and the dollar, leading stocks in Asia to mark the sharpest fall on Friday.

The new variant was detected in South Africa, Botswana and Hong Kong, and so far a little is known of it. However, the scientists believe that the new strain has an unusual combination of mutations and it may be able to evade immune responses or make it more transmissible.

According to British authorities, they think the new variant is the most significant one to date. It is worrisome that the variant could resist vaccines and have hurried to impose travel restrictions, just as did Japan on Friday.

Australia in response to the new variant has also hinted at possible border closures.

The European countries have expanded COVID-19 booster vaccinations and tightened curbs.

Market summary –
• The MSCI’s index of Asia shares outside Japan had its sharpest drop since August, falling 2%.
• In Hong Kong, casino and beverage shares dropped, while travel stocks in Sydney and Tokyo fell through as well.
• Japan’s broad index, Nikkei traded low 3%.
• The U.S. crude oil futures amid fresh demand fears fell about 3%.
• The S&P 500 futures were down by 1%.
• And Euro STOXX 50 futures also fell 2%.
• The bets on rate hikes retreated a little as Fed funds futures rallied, while the two-year Treasury yields fell 6 basis points, making it the sharpest drop since March 2020.
• On Friday, South Africa’s rand fell more than 1.5% to a one-year low.
• While the risk-sensitive Australian and New Zealand dollars each fell to three-month troughs.
• Global shares currently are on course for their worst week since early October due to COVID-19 cases.
• The Dow Jones futures fell 1%, while FTSE futures fell 1.9%.
• In the currency markets the yen rose about 0.6% to 114.67 per dollar.
• The Aussie fell 0.6% at $0.7141.
• As safety rather than policy differentials drove trade in Asia, the euro rose 0.2% to $1.1226.
• The 10-year Treasury yields down eight bps to 1.5618% and 30-year yields down 7 bps to 1.8963%.