New COVID Variant – Omicron – Spooks the Market

Just as global economic circumstances were beginning to normalize, new tensions have emerged, crushing market sentiments. Investors are concerned about the possible impact of the newly discovered COVID-19 variation B.1.1.529, known as Omicron, on global economic development.

As a result, on November 26, investors sold equities, driving down key U.S. indexes as well as European bourses, causing them to have their worst trading session of 2021.

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Impact on the Market

The omicron version of the coronavirus has added to the world’s already-high level of anxiety.

Friday’s trading patterns were almost identical to those that occurred throughout last year’s coronavirus pandemic. As a result, the stock markets have plummeted to their lowest levels in more than a year.

On Friday, the Dow tanked by almost 905 points or 2.5%, marking its worst day of the year. The broader S&P 500 fell 2.3%, while the tech-heavy Nasdaq plummeted 2.2%. In addition, the FTSE 100 index fell 3.6% at the end of Friday’s trading session.

Along with the main indexes, the crypto market took a significant fall on Friday. The price of Bitcoin (BTC-USD), the most popular cryptocurrency, sank 8.1% to $54,246.80.

How Fatal is the New Variant?

Omicron was discovered earlier this month in South Africa, according to reports. The mutation has now been discovered in Belgium, Botswana, Israel, and Hong Kong.

Despite the fact that little is known about the new Omicron virus, it is thought to contain more mutations than any other coronavirus variety found to date. This might limit the efficiency of existing immunizations and could cause it to spread even quicker.

As a result, further research is required before any definitive conclusions can be drawn about the novel variant and its behavior.

The World Health Organization (WHO) designated this new strain as a “variant of concern” (VOC) on Friday, citing its potential to spread faster than prior variants. According to WHO, “preliminary evidence suggests an increased risk of reinfection with this variant, as compared to other VOCs.”

Most Affected Industry – Travel

Amid the fears over the COVID-19 Omicron version, investors were prompted to sell shares in firms that might be affected by a potential restriction on business and mobility. This is because many people are concerned that this new Delta variation may trigger another wave of shutdowns, delaying the economic recovery process.

Sadly, the travel industry is once again the worst hit. Following the discovery of the variation in southern Africa, most governments, including those of the United States, Canada, and Russia, hurried to halt travel to the region.

As a result, most travel stocks took a beating on Friday. Carnival (CCL), American Airlines (AAL), United Airlines (UAL), and Expedia (EXPE), all had their stock prices drop, by 11%, 8.8%, 9.6%, and 9.5%, respectively.

Stocks that Have Gained Steam

The corporations who gained the most during the pandemic are gearing up again.

That’s not to mention COVID vaccine manufacturers such as Moderna (MRNA) and Pfizer (PFE), which have witnessed a magnificent run in the past. Following the WHO’s announcement notification about the Omicron variety, Moderna jumped 20.6%, while Pfizer gained 6.1% on Friday.

The COVID vaccine pharma firms are already working on fighting this potentially deadly disease, with Moderna attempting to set up a new vaccination trial in a couple of months. Regarding this, Moderna CEO Stephane Bancel said, “The mutations in the Omicron variant are concerning and for several days, we have been moving as fast as possible to execute our strategy to address this variant.”

Also, Zoom Communications (ZM) and Peloton Interactive (PTON), two popular stay-at-home investments, both rose 5.7% on Friday.

Bottom Line

Overall, markets are likely to remain low for the time being, until more information about the new variant’s spread, and the efficiency of current vaccines and medications against it, become available.