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Faced with the new variant, the financial markets are panicking

DECRYPTION – Investor reaction points to tough weeks, if the bad news holds true.

Fear is back in the financial markets. Fears surrounding the new variant of Covid-19 detected in South Africa sent all world stock markets plunging on Friday. In Paris, the CAC 40 index collapsed by 4.75%, recording its worst session since March 18, 2020, at the start of the first confinement in France. The star index has now erased all the gains for the month of November and has fallen below the threshold of 7,000 points (6,739.73 points). In Frankfurt, the Dax dropped 4.15% and the London Stock Exchange 3.64%. Same trend in Tokyo (- 2.53%) and Wall Street, where the Dow Jones lost 2.53% at the end of an exceptionally short session this Thanksgiving weekend.

Almost everywhere, investors have found their defensive reflexes. “We are witnessing a rotation towards assets considered safe, which penalizes equities, commodities and oil and benefits bonds”, describes Craig Erlam, analyst at Oanda. The yen and the Swiss franc also acted as safe havens on Friday.

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Airbus and Safran fall

“This new variant gives rise to fears that international travel will be halted again and more generally poses a risk to global growth, which has hitherto been well oriented.», Explains Vincent Mortier, deputy director of management at Amundi. In Europe, the main countries, including France, have already taken measures, banning the arrival of travelers from southern Africa.

As a result, oil prices collapsed on Friday. In London, North Sea brent fell 11.55% to $ 72.72, returning to mid-September levels. And on the other side of the Atlantic, the Texan barrel (WTI), has unscrewed him by 13.06% (68.15 dollars).

On the stock market, the values ​​of companies in the airline sector, already tested by the pandemic, were the most attacked Friday. In Paris, Airbus collapsed by 11.49% and Safran by 10.26%. The European automotive sector, very dependent on the economic cycle, also drank the cup: Michelin fell 7.63%, Renault 7.8% and Stellantis 6.85%. Financial stocks were penalized by the fall in government bond rates. Luxury has also suffered. Only health was not surprisingly illustrated, the French giant of analysis laboratories, Eurofins Scientific, jumping 7.89%.

The fall in prices was however accentuated by the low number of investors present in the markets this Thanksgiving weekend. “The correction is almost salutary, as the prices had risen”, estimates Vincent Mortier, stressing that the CAC 40 has gained another 21.41% since January. However, is a tobacco hit comparable to that of March 2020 possible? “No because at the time, we did not know that States and central banks would put in place measures to protect economies, answers Vincent Mortier. But next week will be decisive. ”

“The reaction of the markets gives a glimpse of what we could expect in the coming weeks if the news concerning the variant is bad”, say analysts at Capital Economics.

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