On November 25, 2021, South African scientists announced the discovery of a new variant of covid-19 strain B.1 In 1529, the strain led to an exponential increase in the number of new covid-19 cases in Gauteng Province, South Africa, which far exceeded the infectivity and stronger immune escape ability of delta strain and attracted global attention. The variable timing of this epidemic coincides with the market expectation that the Federal Reserve will announce the acceleration of taper in December, which may greatly suppress the risk appetite of the financial market in the short term. In this paper, we discuss the pathogenicity of the new strain and its resistance to the vaccine, and analyze the market impact of the epidemic in combination with the asset performance after the time point of the previous epidemic.
What is the background and current situation of the outbreak? It was only two days before scientists announced the discovery of the new virus, but more than 90% of the new covid-19 cases in South Africa were infected.
The new strain of South Africa was first discovered in Botswana. According to BBC news, this is the most mutated strain found so far, with more than 50 mutations. Professor de Oliveira, director of the epidemic response and innovation center in South Africa, said, There are more than 30 mutations in the spinous process protein of the new strain (spinous process protein is the target of most vaccines and the key for the virus to open the door to human cells), while there are 10 mutations in the receptor binding domain (the part where the virus contacts human cells for the first time) (there are only two delta variant strains). Worldwide, people infected with new variant strains have been found in Israel, Belgium and Hong Kong, China, which may cause a heavy blow to the newly recovering tourism industry.
How contagious is it? The transmission speed is the highest among Delta, alpha and other variants. The number of new covid-19 cases has increased from nearly 300 people / day on November 17, 2021 to nearly 2500 people / day on November 26, 2021. Delta took about 100 days to reach 90% of all new cases, while the South African variant reached in about one tenth of the time.
What is the role of covid-19 vaccine and testing? Nucleic acid and antigen detection is expected to continue to take effect. Although the effectiveness of the vaccine remains to be seen, the National Institute of infectious diseases of South Africa pointed out that the mutation of the new strain is unlikely to be malicious, and the existing vaccine is likely to continue to effectively prevent severe illness and death. Although vaccine mutation may reduce the vaccine protection rate, it does not mean that the vaccine is ineffective.
What changes have taken place in the epidemic prevention policy under the impact of new variants? Countries and regions led by Britain have tightened epidemic prevention policies, and international travel bears the brunt. For example, Britain has included six infected countries such as South Africa in the "Red List", direct flights are prohibited, and passengers returning home need nucleic acid testing and home isolation; Israel directly prohibits residents from traveling to relevant infected areas. The lessons learned from the previous counterattack against the delta epidemic show that although early travel restrictions can alleviate the impact of the new virus, it is difficult to stop it. However, after experiencing the delta strain, the government responded more timely and paid more attention to protection in advance.
What is the market impact? The news of the new variety may be "the last straw to crush the camel". The outbreak of the new strain in South Africa and its spread to the world triggered panic in the market Treasury bond yields and commodities (especially crude oil) fell sharply. However, given that there are not enough data to prove the impact of new variants, we believe that with the accumulation of negative factors in the early stage, the news of epidemic variation may be the "last straw" to crush global risk assets , these negative factors may include: ① under high inflation and supply constraints, the growth momentum of the global economy has slowed down significantly; ② The speed of global monetary policy shift began to accelerate, and the market is expected that the Federal Reserve is likely to announce acceleration at the interest rate meeting in December 2021; ③ Under the impact of delta virus, some European countries have restarted the blockade, and the scope of the blockade is still further expanded; ③ For crude oil, the dumping signals and operations of the United States and other economies have brought additional negative pressure; ④ At the transaction level, near the end of the year, previously profitable investment positions will be more inclined to profit taking in the face of uncertainty.
From the performance of specific assets, the decline of oil price and 10-year US bond yield is the "standard configuration" of the outbreak of the epidemic. It can be seen from figures 5 to 8 that under the addition of many negative factors, the range of this market adjustment is significantly greater than that of the outbreak of delta virus; Both the US dollar and gold can play the role of "safe haven assets", but they can't have both. The emergence of the new strain of the virus cooled the market's expectations of the Fed's tightening, leading to the decline of the US dollar and the rise of gold.
How to view the variables brought by the new strain? For market participants, the next step is to focus on the pathogenicity and vaccine resistance of new variants. If the severity of these aspects exceeds expectations, the pace of global economic recovery may be interrupted again, or it will reduce the urgency of Fed tightening and impact the "radical" market tightening expectations since November. We can consider making a flat curve in time to reduce the short position of long-end US bonds.
This week (November 22, 2021-november 26, 2021, the same below) overseas market review: according to Wande's data, the covid-19 mutant virus found in South Africa once again aroused the market's concern, and the European and American stock indexes closed down. On November 26, 2021, the S & P 500 index recorded the largest one-day decline since February. This week, the Dow Jones index fell 1.97%, the S & P 500 index fell 2.20% and the NASDAQ index fell 2.20% The index fell 3.52%, the German DAX index fell 5.59%, the French CAC40 index fell 5.24% and the FTSE 100 index of the UK fell 2.49%. Funds flowed into the bond market under risk aversion. On November 26, the yield of 10-year US bonds fell 16 basis points to 1.48%, and the yield of 30-year US bonds fell 14 basis points to 1.83%. Under the haze of the mutant strain, the global economic recovery is under pressure. On November 26, the international oil price fell across the board. The January contract of us oil fell 13.04% to US $68.17/barrel, and the February contract of oil distribution fell 11.27% to US $71.80/barrel. The February contract of oil distribution this week decreased by 8.99%. In terms of precious metals, Comex gold fell 3.2% and Comex silver fell 6.6% this week.
Risk tip: the epidemic spread exceeded expectations, and China's foreign policies exceeded expectations
