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New Covid Variant May Trigger Early Sell-Off On Wall Street

The major U.S. index futures are currently pointing to a sharply lower open on Friday, with stocks likely to see an early sell-off as trading resumes following the Thanksgiving Day holiday.

The downward momentum on Wall Street comes following reports a new and possibly vaccine-resistant coronavirus variant has been detected in South Africa.

The news, which comes amid a surge in new Covid-19 cases in Europe, has raised concerns the pandemic could continue to wreak havoc on the global economy.

The U.K. has issued a temporary ban on flights from six African countries in reaction to the new variant, which has also been detected in Israel and Hong Kong.

The World Health Organization will hold a "special meeting" to discuss if the heavily mutated strain will become a variant of interest or a variant of concern.

An early sell-off on Wall Street may be exacerbated by below average volume, as some traders are likely to remain away from their desks ahead of an early close by the markets.

A lack of major U.S. economic data may also keep traders on the sidelines ahead of next week's closely watched monthly jobs report.

Stocks moved to the downside early in the session on Wednesday but showed a notable turnaround over the course of the trading day. The major averages climbed well off their early lows, with the Nasdaq and the S&P 500 closing in positive territory.

The Nasdaq rose 70.09 points or 0.4 percent to 15,845.23 and the S&P 500 inched up 10.76 points or 0.2 percent to 4,701.46. Meanwhile, the Dow bounced well off its worst levels but still closed down 9.42 points or less than a tenth of a percent at 35,804.38.

The early weakness on Wall Street came amid a continued increase in U.S. treasury yields, with the yield on the benchmark ten-year note reaching its highest intraday level in six months.

Yields were extending the upward move seen since President Joe Biden announced his intent to re-nominate Federal Reserve Chair Jerome Powell amid concerns the central bank could accelerate plans to tighten monetary policy.

A Labor Department report showing first-time claims for U.S. unemployment benefits slid to their lowest level in over fifty years in the week ended November 20th helped push yields higher.

The Labor Department said initial jobless claims tumbled to 199,000, a decrease of 71,000 from the previous week's revised level of 270,000.

Economists had expected jobless claims to edge down to 260,000 from the 268,000 originally reported for the previous week.

With the much bigger than expected decrease, jobless claims fell to their lowest level since hitting 197,000 in November of 1969.

Yields showed a notable downturn over the course of the trading day, however, with the pullback contributing to the rebound on Wall Street.

The volatility in the bond market came amid the release of slew of U.S. economic data in addition to the weekly jobless claims report.

The Commerce Department released separate reports showing an unexpected drop in durable goods orders but an increase in new home sales in the month of October.

Another Commerce Department showed personal income and spending both increased by more than expected during the month.

Meanwhile, traders largely shrugged off the release of the minutes of the Federal Reserve early November monetary policy meeting.

While the minutes said some participants felt the Fed should be prepared to raise interest rates sooner than currently anticipated if inflation continues to run high, traders may have viewed the sentiment as old news.

Most of the major sectors ended the day showing only modest moves, although computer hardware stocks moved sharply higher, driving the NYSE Arca Computer Hardware Index up by 3 percent to a five-month closing high.

HP Inc. (HPQ) led the sector higher, spiking by 10.1 percent after the computer and printer maker reported fiscal fourth quarter results that beat expectations and raised its first quarter guidance.

Interest rate-sensitive commercial real estate stocks also showed a strong move to the upside, with the Dow Jones U.S. Real Estate Index climbing by 1.2 percent to its best closing level in well over two months.

Natural gas and semiconductor stocks also saw some strength on the day, while steel stocks moved notably lower over the course of the session.

Commodity, Currency Markets

Crude oil futures are plummeting $4.35 to $74.04 a barrel after edging down $0.11 to $78.39 a barrel on Wednesday. Meanwhile, after inching up $0.50 to $1,784.30 an ounce in the previous session, gold futures are jumping $19 to $1,803.30 an ounce.

On the currency front, the U.S. dollar is trading at 113.86 yen versus the 115.36 yen it fetched on Thursday. Against the euro, the dollar is valued at $1.1290 compared to yesterday's $1.1209.

Asia

Asian stocks slumped on Friday as the detection of a new and possibly vaccine-resistant coronavirus variant in South Africa hit global risk sentiment.

The new variant has been red-flagged by scientists over an alarmingly high number of spike mutations that might make the virus more resistant to vaccines.

Chinese shares ended lower as a handful of local Covid-19 cases in the eastern parts of China prompted Shanghai to limit tourism activities and a nearby city to cut public transportation services.

The benchmark Shanghai Composite Index slid 20.09 points, or 0.6 percent, to 3,564.09, dragged down by semiconductor-related and energy stocks. Hong Kong's Hang Seng Index plummeted 659.64 points, or 2.7 percent, to 24,080.52.

Japanese shares hit a one-month low and the safe-haven yen rallied, as fears of a new coronavirus variant raised fears about the global economic outlook.

The Nikkei 225 Index plunged 747.66 points, or 2.5 percent, to 28,751.62, closing below 29,000 for the first time in about a month. The broader Topix ended down about 2 percent at 1,984.98, with selling seen across the board.

Rail companies suffered heavy losses, with Central Japan Railway, Western Japan Railway and Keisei Electric Railway losing 3-6 percent. All Nippon Airways parent ANA Holdings plummeted 4.5 percent after raising funds through a sale of convertible bonds.

Softbank Group lost 5.2 percent on a Bloomberg report that Beijing has asked Chinese hailing giant Didi to delist from New York due to concerns about data security. The Japanese conglomerate is a large investor in U.S.-listed Chinese tech firms, including Didi and Alibaba.

Australian markets suffered their sharpest drop in nearly two months as worries about the new South African Covid variant overshadowed better than expected October retail sales data.

The benchmark S&P/ASX 200 Index tumbled 128 points, or 1.7 percent to 7,279.30, marking its biggest drop since October 1. The broader All Ordinaries Index ended down 137 points, or 1.8 percent, at 7,599.90.

Energy stocks had their worst session since September 2020 as oil prices tumbled amid fresh demand fears and concerns about oversupply. Oil Search, Woodside Petroleum and Santos fell about 5 percent each.

Travel stocks such as Qantas Airways, Corporate Travel Management and Flight Centre Travel lost 5-7 percent after authorities warned the country may have to close its borders to travelers from the African nation if risks from the new strain rise.

Gold miners Evolution and Newcrest rose about 1 percent each as investors flocked to safe havens, including gold.

Seoul stocks extended losses for the fourth day running as the coronavirus evolves and spreads with worrying mutations.

The Kospi slumped 43.83 points, or 1.5 percent, to close at 2,936.44, dragged down by chemical and tech heavyweights. Banks bucked the weak trend, a day after the country's central bank raised its policy rate to 1 percent.

Europe

European stocks fell sharply on Friday as reports of a newly identified and possibly vaccine-resistant coronavirus variant added to concerns over surging Covid cases in Europe.

Little is known of the variant detected in South Africa, Botswana and Hong Kong, but scientists said it may be able to evade immune responses or make it more transmissible.

The World Health Organization will hold a "special meeting" today to discuss if the heavily mutated strain will become a variant of interest or a variant of concern.

While the French CAC 40 Index has shown a 3.9 percent nosedive, the German DAX Index and the U.K.'s FTSE 100 Index are down by 3.1 percent and 3 percent, respectively.

Banks Commerzbank, BNP Paribas, Lloyds Bank and Deutsche Bank have moved sharply lower, tracking a slump in bond yields.

Travel stocks have also been hit hard as the U.K. issued a temporary flight ban on six African countries. British Airways owner IAG and airline EasyJet are posting steep losses.

Beverage company Diageo has also declined after announcing it has started the next tranche of its return of capital program.

Infineon Technologies has also moved lower. The semiconductor company announced the appointment of Jochen Hanebeck as the new Chief Executive Officer, effective April 1.

Meanwhile, stay-at-home stocks have bucked the weak trend, with Delivery Hero and Just Eat Takeaway.com posting notable gains

U.S. Economic Reports

No major U.S. economic data is scheduled to be released today.

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