Travel Stocks Will Take A Massive Hit At The Start Of Today’s Trading Session
S&P 500 futures are down by more than 1.5% in premarket trading amid global market sell-off which was caused by the emergence of the new variant of coronavirus.
Britain was the first country to ring the alarm bells over a COVID-19 variant which was spreading in South Africa. The variant, which is currently called B.1.1.529, is believed to have many mutations.
In response to the new threat, Britain has decided to cancel flights from six African countries. The President of the European Commission Ursula von der Leyen has also stated that EU will stop air travel from southern African countries.
WHO is currently discussing the new variant in Geneva, and may later come up with recommendations. At this point, WHO did not recommend curbing travel, but it looks that no one will listen to WHO as countries have already rushed to protect their borders from the virus.
In this environment, travel-related stocks will be hit hard at the start of today’s trading session. For example, Delta Air Lines stock is down by 7.5% in premarket trading, while Booking Holdings stock is down by 5%.
WTI Oil Is Under Strong Pressure
WTI oil has recently made an attempt to settle below the $73 level as travel curbs will hurt demand for oil at a time when U.S. decided to release 50 million barrels from the Strategic Petroleum Reserve in order to put pressure on oil prices.
Given the recent developments, OPEC+ should decide to keep current production levels intact for the next few months, but it remains to be seen whether this move will be able to provide enough support to the oil market.
The new variant of coronavirus is a much stronger catalyst compared to additional supply from reserves, and travel curbs will likely deal material damage to demand in the near term.
Gold Shines As Traders Rush To Safety
The yield of 10-year Treasuries has moved from 1.65% towards the 1.52% level as traders bought U.S. government bonds to protect themselves from new risks. Meanwhile, the U.S. dollar lost support and declined against a broad basket of currencies.
Lower yields and weaker dollar provided significant support to gold, which managed to get back above the $1800 level. Gold mining stocks are already gaining ground in premarket trading.
Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.