“It will be shut down again” Anxiety spreads… European and Asian stock markets also plunged.
“Insufficient information on Omicron” in the prospect of “KOSPI will fall below 2900”
With the advent of ‘Omicron’, a new variant of the novel coronavirus infection (COVID-19), the global economy has fallen into panic fear again. There are growing concerns that the rapid spread of the new mutation could cause the global economy to stop restarting and “shut down” again. There are also concerns that the U.S. Federal Reserve’s (Fed) rate hike plans could be disrupted.
On the 26th (local time) in the New York Stock Exchange, the Dow Jones Industrial Average closed at 34,899.34, down 905.04 points (2.53%) from the previous day. The S&P 500 and Nasdaq fell 2.27% and 2.23%, respectively, to close the trading day. According to FactSet, a financial information company, the Dow’s decline was the biggest this year. European and Asian stock markets also suffered sharp declines on the day. The Wall Street Journal reported that it was “the worst Black Friday event since 1950.” In general, on Black Friday, the biggest shopping season in the U.S., U.S. stocks ended higher on expectations of an increase in retail sales. Market Watch, an economist, also reported that “it was the worst Black Friday market in 70 years.”
It was the COVID-19 mutant virus reported in South Africa that made the US stock market ‘Black Friday’ for the Thanksgiving holiday. If the Omicron virus, which seems to have the strongest transmission power since the delta mutation, spreads around the world, concerns have spread that countries may tighten travel restrictions and quarantine regulations, putting cold water on the economic recovery trend.
In the New York Stock Exchange, these investors’ concerns erupted all at once. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX), called Wall Street’s ‘fear index’, rose to 28, the highest in two months, reflecting investor anxiety. While stock prices plummeted, safe asset prices soared. The yield on the 10-year U.S. Treasury bond fell 0.15 percentage points (the bond price rose) in just one day, dropping to 1.49%. It was the biggest one-day drop since March last year, when the impact of COVID-19 began in earnest. A fall in bond yields means the market is expecting the central bank, the Fed, to slow rate hikes in preparation for a downturn. The Fed, which recently started tapering asset purchases, has been predicted to raise interest rates around the middle of next year and break out of ‘zero interest rates’.
International oil prices plummeted on the prospect of a contraction in economic activity. On the same day, West Texas Intermediate (WTI) futures fell by $10.24 (13.1%) to close at $68.15 per barrel.
The negative impact on the domestic financial market is expected to be inevitable. Jung Yong-taek, head of the research center at IBK Investment & Securities, said, “Until research results on whether Omicron will neutralize the effectiveness of the existing vaccine, it will have no choice but to have a negative impact on the domestic stock market for the time being. did.
However, there are also opinions that we need to be careful as there is not enough information about Omicron. “I want to emphasize that very little is known about this mutation so far,” Paul Hickey, co-founder of Bespoke Group, an American investment advisory firm, said in a letter to clients. .
New York = Correspondent Yoo Jae-dong jarrett@donga.com
Reporter Lee Sang-hwan payback@donga.com
Reporter Kim Ye-yoon yeah@donga.com
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