The Friday after thanksgiving is called black Friday because that’s when retailers finally turn profitable for the year. Not so much for market, however, because this morning it’s red as far as the eye can see. The culprit: the same one we discussed late last night – the emergence of a new coronavirus strain detected in South Africa, known as B.1.1.529, which reportedly carries an “extremely high number” of mutations and is “clearly very different” from previous incarnations, which may drive further waves of disease by evading the body’s defenses according to South African scientists, and soon, Anthony Fauci.

British authorities think it is the most significant variant to date and have hurried to impose travel restrictions on southern Africa, as did Japan, the Czech Republic and Italy on Friday. The European Union also said it aimed to halt air travel from the region.

“Markets have been quite complacent about the pandemic for a while, partly because economies have been able to withstand the impact of selective lockdown measures. But we can see from the new emergency brakes on air travel that there will be ramifications for the price of oil,” said Chris Scicluna, head of economic research at Daiwa.

As a result, what was initially just a 1% drop in US index futures, has since escalated to a plunge of as much as 2% with eminis dropping the most since September, at one point dropping below 4,600 after closing on Wednesday above 4,700 as a post-Thanksgiving selloff spread across global markets amid mounting concerns the new B.1.1.529 coronavirus variant – which today will be officially called by the Greek lettter Nu – could derail the global economic recovery.  Russell 2000 contracts sank as much as 5.4%. Technology shares may be caught in the net too as Nasdaq 100 futures slid.

The VIX increased as much as 9.4 vols to 28, it’s biggest jump since January. It was last seen up 7.4 points, or the biggest increase since February.

Adding to the pain, there is nothing on today’s macro calendar and the US market closes early which will reduce already dismal liquidity even more, exacerbating some of the moves throughout the session. Headlines are likely to center on various nations preventing travel from South Africa whilst potentially imposing more stringent COVID measures domestically, as well as which countries “find” the Nu variant.

Amid the panicked flight to safety, 10Y TSY yields tumbled as traders slashed bets on monetary tightening by the Federal Reserve (just hours after Goldman predicted that the Fed would double the pace of its taper and hike 3 times in 2022, oops) …

… as did oil amid fears new covid lockdowns will lead to a collapse in crude demand (they will also certainly force OPEC+ to put on pause their plans to keep hiking output by 400K every month).

Paradoxically, even cryptos are tumbling, which is surprising since even the dumbest algos should realize by now that a new covid outbreak means more dovish central banks, no tightening, and if nothing else, more QE and more liquidity which is precisely what cryptos need to break out to new all time highs.

Cruise ship operator Carnival slumped 9.1% in premarket trading and Boeing slid 5.8% as travel companies tumbled worldwide. Stay-at-home stocks such as Zoom Video rallied.  Didi Global shares fell after Chinese regulators reportedly asked the ride-hailing giant to delist from U.S. bourses. Here are some of the other big premarket movers:

• Airlines and other travel stocks slumped in premarket trading on growing concern about a new Covid-19 variant identified in southern Africa. The European Union is proposing to halt air travel from several countries in the area and the U.K. will temporarily ban flights from the region.
• United Airlines (UAL US) fell 8.9%, Delta Air (DAL US) -7.9%, American Airlines (AAL US) -6.7%; cruiseline-operator Carnival (CCL US) -12%; hotelier Marriott (MAR US) -6.1%; lodging company Airbnb (ABNB US) -6.9%.
• Stay-at-home stocks that benefit from higher demand in lockdowns rose in premarket, with Zoom Video (ZM US) gaining 8.5% and fitness equipment group Peloton (PTON US) +4.7%.
• Vaccine stocks surged in premarket, while Pfizer and BioNTech got an added boost after their coronavirus shot won European Union backing for expanded use in children. Moderna (MRNA US) rose 8.8%, Novavax (NVAX US) +6.2%, Pfizer (PFE US) +5.1%, BioNTech (BNTX US) +6.4%.
• Small biotech stocks gained in premarket as investors sought havens. Ocugen (OCGN US) added 22%, Vir Biotechnology (VIR US) +7.8%, Sorrento Therapeutics (SRNE US) +5%.
• Cryptocurrency-exposed stocks fell as Bitcoin dropped as investors dumped risk assets. Marathon Digital (MARA US) declined 9%, Riot Blockchain (RIOT US) -8.8%, Coinbase (COIN US) -4.6%.
• Didi Global (DIDI US) declined 6% in premarket after Chinese regulators were said to have asked the ride-hailing giant to delist from U.S. bourses.
• Selecta Biosciences (SELB US) dropped 13% in Wednesday’s postmarket ahead of Thursday’s Thanksgiving closure, after saying the U.S. FDA placed a clinical hold on a trial.
• Quotient Technology (QUOT US) gained 3.9% in Wednesday’s postmarket on news that a board member bought $150,000 of shares.

What happens next will matter and so, all eyes are on the opening bell for the U.S. markets, set to return from the holiday for a shortened trading session. Tumbling futures and a soaring VIX signaled that the rout in Asia and Europe won’t spare New York equities, while lack of liquidity will only make the pain worse. The Japanese yen emerged as the main haven currency of the day, with the dollar languishing.

“Every trader in New York will be rushing to the office now,” said Salm-Salm & Partner portfolio manager Frederik Hildner, adding that news of the new variant could mean the end of the inflation and tapering debate.

The worsening pandemic poses a dilemma for central banks that are preparing to tighten monetary policy to curb elevated price pressures, according to Ipek Ozkardeskaya, senior analyst at Swissquote.

“It’s terrible news,” Ipek Ozkardeskaya, a senior analyst at Swissquote, said in emailed comments. “The new Covid variant could hit the economic recovery, but this time, the central banks won’t have enough margin to act. They can’t fight inflation and boost growth at the same time. They have to choose.”

“We now have a new Covid variant that’s ‘very’ different from the ones we knew so far, a rising inflation, and a market bubble,” she said.  “The only encouraging news is the easing oil prices, which could tame the inflationary pressures and give more time to the central banks before pulling back support.”

In the meantime, the World Health Organization and scientists in South Africa were said to be working “at lightning speed” to ascertain how quickly the B.1.1.529 variant can spread and whether it’s resistant to vaccines. The new threat adds to the wall of worry investors are already contending with in the form of elevated inflation, monetary tightening and slowing growth.

In Europe, the Stoxx 600 index headed for the biggest drop in 13 months plunging 2.7%; travel and banking industries led the Stoxx Europe 600 Index down as much as 3.7%, the biggest intraday drop since June 2020. Airbus slumped 8.6% in Paris and British Airways owner IAG tumbled 12% in London, while food-delivery stocks gained.  Here are some of the biggest European movers today:

• Stay-at-home stocks and Covid testing firms such as TeamViewer and DiaSorin are among the biggest gainers as worries over a new Covid variant send the Stoxx 600 tumbling on lockdown fears
• TeamViewer and DiaSorin rise as much as 6% and 7%, respectively
• On the down side, travel and leisure stocks plunge, with the likes of IAG, Lufthansa and Carnival posting double- digit falls
• IAG drops as much as 21%
• Software AG shares rise as much as 9.5% after Bloomberg reported that the firm is exploring strategic options, including a potential sale, with Morgan Stanley saying the company’s biggest headwinds are behind it.
• Evolution gains as much as 4.6%, recouping part of Thursday’s 16% plunge, with Bank of America saying the share price’s “crazy time” amounts to a good buying opportunity.
• Skistar rises as much as 3.7%, bucking steep declines for travel and leisure stocks, after Handelsbanken upgraded the stock, saying bookings for the Scandinavian ski resort operator are “set to surge.”
• Telecom Italia climbs as much as 2.8% following a Bloomberg report that private equity firms KKR and CVC are considering teaming up on a bid for the company.
• ING Groep falls as much as 11% after Goldman Sachs analyst Jean-Francois Neuez cut his recommendation to neutral from buy.
• Getlink drops as much as 6% as French fishermen start protests aimed at stepping up pressure on the U.K. in a post-Brexit fishing dispute.

Earlier in the session, MSCI’s index of Asian shares outside Japan fell 2.2%, its sharpest drop since August. Casino and beverage shares were hammered in Hong Kong, while travel stocks dropped in Sydney and Tokyo. Japan’s Nikkei skidded 2.5% and S&P 500 futures were last down 1.8%.

Giles Coghlan, chief currency analyst at HYCM, a brokerage, said the closure of the U.S. market for the Thanksgiving holiday on Thursday had exacerbated moves. “We need to see how transmissible this variant is, is it able to evade the vaccines – this is crucial,” Coghlan said. “I expect this story to drag on for a few days until scientists have a better understanding of it.”

Indian stocks plunged as the detection of a new coronavirus strain rattled investor sentiment globally, raising concerns over a likely setback to the nascent economic recovery.  The S&P BSE Sensex lost 2.9%, the most since mid-April, to 57,107.15 in Mumbai, taking its loss this week to 4.2%, the biggest weekly drop since January. The NSE Nifty 50 Index declined by a similar magnitude on Friday. Reliance Industries was the biggest drag on both measures and declined 3.2%.  “There is fear of this new variant spreading to other countries which might again derail the global economy,” said Hemang Jani, head of equity strategy at Motilal Oswal Financial Services Ltd.   Of the 30 shares in the Sensex index, 26 fell and 4 gained. All but one of 19 sub-indexes compiled by BSE Ltd. retreated, led by a index of realty companies. The S&P BSE Healthcare index was the only sub-index to gain, surging 1.2%. While researchers are yet to determine whether the new virus variant is more transmissible or lethal than previous ones, authorities around the world have been quick to act. The European Union, U.K., Israel, and Singapore placed emergency curbs on passengers from South Africa and the surrounding region.

Travel stocks were among the hardest hit. InterGlobe Aviation Ltd. fell 8.9%, Spicejet Ltd. slipped 6.7% and Indian Hotels Co. Ltd. plunged 11.2%, the most since March 2020.  “Nervousness on the new variant of coronavirus and expectations of the U.S. Fed increasing the pace of tapering have led to recent market weakness,” Amit Gupta, fund manager for portfolio management services at ICICI Securities Ltd. said. “This trend may take some time to recover as the WHO meeting on the new mutant variant impact and hospitalization rates in US and Europe will be watched by the market very closely.”

Crude oil to emerging markets completed this picture of mayhem.

In rates, fixed income was firmly bid as Treasuries extended their advance led by the belly of the curve, outperforming bunds, while money markets pared rate-hike bets amid fears that a new coronavirus strain may spread globally, slowing economic growth. Cash Treasuries outperformed, richening 12-14bps across the short end, with Thursday’s closure exacerbating the optics. As shown above, 10Y Treasury yields shed as much as 10 basis points while the Japanese yen jumped the most since investors’ March 2020 rush for safety. Yields across the curve are lower by more than 8bp at long end, 13bp-15bp out to the 7-year point, moves that if sustained would be the largest since at least March 2020 and in some cases since 2009. Short-term interest rate futures downgraded the odds of Fed rate increases. Gilts richened 10-11bps across the curve, outperforming bunds by 4-5bps. Peripheral and semi-core spreads widen. In FX, JPY and CHF top the G-10 scoreboard with havens typically bid.

In FX, the Bloomberg Dollar Spot Index was little changed after earlier touching a fresh cycle high, and the greenback was mixed versus its Group-of-10 peers as the yen and the Swiss franc led gains while the Canadian dollar and Norwegian krone were the worst performers as commodity prices plunged. Traders pushed back the timing of a 25-basis-point rate increase by the Federal Reserve to July from June, with only one further hike expected for the remainder of 2022. It’s a similar story in the U.K. where the Bank of England is now expected to tighten policy in February instead of next month. Wagers that the ECB will raise its deposit rate by the end of next year have also been slashed, with only a six basis-point increase priced in, half of that seen earlier this week. The European Union is proposing to follow the U.K. in halting air travel from southern Africa after the new Covid-19 variant was identified there. The yen is at the epicenter of skyrocketing currency volatility as the new virus variant shakes markets. The cost of hedging against swings in the Japanese currency over the next week, which captures the release of the next U.S. payrolls report, is the most expensive in more than a year.

In commodities, crude futures are hit hard. WTI drops over 7% before finding support near $73, Brent drops over 5% before recovering near $78. Spot gold grinds higher, adding $21 to trade near $1,809/oz. Base metals are sharply offered with much of the complex off as much as 3%.

Looking at the otherwise quiet day ahead, data releases include French and Italian consumer confidence for November, as well as the Euro Area M3 money supply for October. Otherwise, central bank speakers include ECB President Lagarde, Vice President de Guindos, and the ECB’s Visco, Schnabel, Centeno, Panetta and Lane, and BoE chief economist Pill.