While health restrictions have tightened throughout Europe for a few days, the discovery of a new variant from southern Africa has severely dropped the stock markets on Friday November 26: – 5.02% for the CAC40, – 4.15% for the DAX in Germany, – 3.64% for the FTSE 100 in the United Kingdom… The trend was the same in the United States, where all stock market indices lost more than 2% during the session, while the barrel of WTI oil slumped 12%, just below the $ 70 mark.
The discovery of the so-called B.1.1.529 variant, first in Botswana and then in South Africa, is still very recent but its profile seems worrying, with a potential for very rapid spread and possible resistance to vaccines. Cases have also been detected in Hong Kong, Israel and Belgium. Soon, most countries suspended flights from southern Africa. The UK was the first to announce it on Thursday evening. France did the same on Friday, banning “For a minimum period of forty-eight hours” arrivals from South Africa, Lesotho, Botswana, Zimbabwe, Mozambique, Namibia and Eswatini (new name for Swaziland). The European Commission has proposed to the whole European Union to do the same.
The World Health Organization tried to moderate the concern on Friday, saying it was too early to assess the danger of this variant. But the financial markets ignored it.
It must be said that the situation was ripe. “The markets have risen a lot in the last eight weeks, in addition to a year that was already good, and they were waiting for the first excuse to correct”, says Chris Beauchamp, analyst at IG, a brokerage firm. After this day, the CAC 40 remains up 20% since the start of the year.
Recession narrowly averted
Moreover, in recent weeks, across Northern Europe, bad economic news has been increasing. Belgium, the Netherlands, Germany, Austria… One by one, the governments are imposing new health restriction measures. Austria is in confinement for twenty days. On Friday, the Belgian government tightened health restrictions for the second time in a week: bars and restaurants must close at 11 p.m., while nightclubs must draw the iron curtain for three weeks.
Germany, which accounts for a fifth of the euro area economy, is also teetering on the brink of containment. The restrictions change according to the Länder, but everywhere they are tightened, between imposition of the health pass, cancellation of Christmas markets and limitation of the number of people per store. Oliver Rakau, from Oxford Economics, based in Frankfurt, closely follows the mobility index provided by Google, which has been declining for a few weeks: “We are witnessing a kind of voluntary social distancing. “ People move a little less, avoid crowded places, choose telecommuting … “The truth is that the pandemic is still with us, for longer than we hoped”, he adds.
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