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The share market sank to a third weekly loss after an emerging new Covid variant triggered sharp sell-offs on Asian markets and in US equity futures.

The South African variant is so new the World Health Organization has yet to give it a name, but Australian investors were in no mood to wait for details. The S&P/ASX 200 dived 128 points or 1.73 per cent to a six-week closing low.

The loss sealed a weekly deficit of 117 points or 1.6 per cent. The decline also pulled the index into the red for the month, down 44 points or 0.6 per cent. Today’s loss was the market’s heaviest in almost two months.

What moved the market

A broad sell-off lowered all sectors. Energy, travel and other ‘Covid-sensitive’ sectors spearheaded the decline. Energy stocks dived 4.56 per cent. Travel agents shed up to 7.5 per cent. The risk-sensitive Small Ords slumped 2.23 per cent. Gold jumped. Oil and the dollar declined.

The trigger was a Covid variant currently known only as B.1.1.529. The variant is still in its infancy, but UK health authorities have seen enough to slap travel bans on six African countries. Health officials said the strain could be “the worst one yet”.

“What we do know is there’s a significant number of mutations, perhaps double the number of mutations that we have seen in the Delta variant,” Britain’s Health Minister Sajid Javid said.

“And that would suggest that it may well be more transmissible and the current vaccines that we have may well be less effective.”

The share sell-off started mildly and accelerated as Asian markets switched to “risk off”. By the Australian close, the Asia Dow had lost 2 per cent, China’s Shanghai Composite 0.5 per cent, Hong Kong’s Hang Seng 2.13 per cent and Japan’s Nikkei 2.7 per cent.

Futures action suggested a bruising end to the US trading week. With volumes impacted by the Thanksgiving holiday, S&P 500 futures tanked 44 points or 0.95 per cent. The Dow, which is weighted towards companies exposed to the economic impact of another global slowdown, skidded 436 points or 1.22 per cent.

The swing lower will add to the usual end-of-month volatility next week as institutional investors rebalance their portfolios. Australian GDP data and US jobs figures are also ahead next week.

“The upcoming week is likely to be far more exciting than Thanksgiving week, where the market is expected to react to a bunch of economic data,” Kalkine Group CEO Kunal Sawhney said. 

“In the US market, data on pending home sales, consumer confidence, manufacturing PMI, crude oil inventories, and unemployment are expected to keep investors hooked to the trading setup. At the same time, investors are likely to closely monitor Australia’s September quarter GDP, building approvals, and international trade data.” 

Winners’ circle

Winners grew increasingly scarce as the session soured. By the close, just 14 of the 200 companies on the benchmark were still above water. The index’s best gains were all gold miners as traders bought havens: St Barbara +2.17 per cent, Evolution Mining +1.23 per cent, Silver Lake Resources +1.19 per cent and Newcrest +0.83 per cent.

A 33 per cent jump in home loans lodged over the first three months of the financial year helped lift Australian Finance Group 9.36 per cent. October was a record month for the mortgage broker, with a 36 per cent increase in loans lodged to a record $388 million.

EML Payments coasted up another 0.55 per cent following news yesterday that Ireland’s regulator had cleared the way for the company to expand its offering.  

Doghouse

Travel and tourism stocks copped the worst of the selling following the UK’s African travel bans. Flight Centre gave up 7.45 per cent, Helloworld Travel 5.02 per cent, Webjet 5.14 per cent, Corporate Travel Management 5.8 per cent and Qantas 5.48 per cent.

In the energy sector, Woodside plunged 5.1 per cent, Oil Search 5.45 per cent and Santos 4.84 per cent.

A week-long rally in iron ore miners soured after one of China’s main steel hubs reimposed production curbs to contain pollution ahead of the Winter Olympics. The news snuffed out hopes normal output could resume after steel mills met previous targets. Spot ore prices dropped 3.2 per cent yesterday.

Fortescue Metals fell 3.86 per cent, Rio Tinto 2.25 per cent and BHP 1.53 per cent. Other major drags included Macquarie Group -3.22 per cent, Afterpay -2.37 per cent and CSL -1.77 per cent.

ANZ eased 0.73 per cent following trouble with the regulator. The Australian Securities and Investments Commission (ASIC) launched Federal Court proceedings against the bank alleging breaches of the Credit Act in relation to a home loan “introducer program”. ANZ said it had cooperated with the regulator and established a remediation program for affected customers.

Commonwealth Bank shed 1 per cent, NAB 2.37 per cent and Westpac 2.54 per cent.

AMP sagged 4.31 per cent after declaring it will write down $325 million as it cleans up the books ahead of a demerger of AMP Capital. The investment manager will recognise charges related to deferred tax assets, the write-down of intangibles, lease contracts and other impairments in its full-year result. The impairments will not impact underlying profit.

A ratings downgrade from Macquarie helped drive Appen down 18.81 per cent. The broker cut its advice to ‘Underperform’ from ‘Neutral’, citing the possibility of an earnings downgrade.

Kogan sank 5.65 per cent to a fresh 18-month low in the wake of yesterday’s second strike against the board of directors.

Other markets

Oil tanked under the threat of a demand hit from new Covid restrictions. Brent crude fell US$1.86 or 2.3 per cent to US$79.06 a barrel.

Gold attracted haven buying, rising US$13.80 or 0.77 per cent to US$1,798.10 an ounce.

Fading risk appetite helped drive the dollar down 0.44 per cent to 71.41 US cents.

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