Stocks and oil prices plunged Friday after health officials in South Africa said they have detected alinked to a spike in cases.
The new variant, known among scientists as B.1.1.529, has spread rapidly among young people in Gauteng, the country's most populous province, Health Minister Joe Phaahla announced Thursday. He said B.1.1.529 is a concern because of its many mutations. That could make it easier to transmit, although many new virus variants die out. The variant has also been found in Botswana and Hong Kong in travelers from South Africa.
Sharon Peacock, who has led genetic sequencing of COVID-19 in Britain at the University of Cambridge, said the data so far suggest the new variant has mutations "consistent with enhanced transmissibility," but said that "the significance of many of the mutations is still not known."
So far fewer than 100 cases of the new variant have been confirmed, largely among young people in South Africa, who have the lowest vaccination rate in the country.
Dow futures were down 788 points, or 2.1%, as of 7:58 a.m. EST, pointing to a sharp decline when U.S. markets open for trading. S&P 500 futures fell 71 points, or 1.5%, while Nasdaq Composite futures sank 113 points, or 0.7%.
Overseas, stocks also slid. London's benchmark dropped 3.3% at the opening, while markets in Tokyo, Shanghai, Frankfurt and Hong Kong also slumped.
Spooked investors are moving money into safer assets, such as sovereign bonds, Deutsche Bank analysts said.
"Sectors and countries most exposed to the pandemic (tourism, energy etc.) have been hit hardest," Neil Shearing of Capital Economics said in a report. "We expect those patterns to persist in the near term as investors digest the implications of the new variant."
The U.K. has banned flights from South Africa, while European Union officials said they will propose halting air travel from countries where B.1.1.529 has been found, according to Reuters.
Oil prices also declined, with Shearing saying it reflects "the fear that the new variant will lead to widespread travel restrictions and lower oil demand."
Investors were already more cautious after Federal Reserve officials said in notes from their October meeting released this week that they foresaw the possibility of raising interest rates sooner than previously planned, in response to higher inflation.
Yet the potential risk from B.1.1.529 could make central bankers think twice about withdrawing policies aimed at shoring up economic growth, according to Capital Economics.
Concerns over the new coronavirus variant are flaring as the holiday shopping season, a key period for retailers around the U.S.
Roughly 70% of shoppers surveyed by consulting firm Deloitte said they had already started their holiday shopping by the last week of October. Eighty percent of early shoppers' budgets is expected to be spent by the end of the Thanksgiving period.
—The Associated Press contributed to this report
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