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“Early analysis shows that this variant has a large number of mutations that require and will undergo further study,” the WHO said.

The news has hammered confidence in Asian markets, which were already under pressure as traders prepared for the Federal Reserve to start tightening its monetary policy to fend off surging inflation.

On equity markets, Tokyo dived three percent while Hong Kong was more than two percent off—with Sydney, Seoul, Singapore, Taipei, Manila, Mumbai, Wellington and Jakarta more than one percent lower.

Firms linked to travel were among the worst affected as investors fretted over the possibility that more restrictions will be brought in by governments.

Sydney-listed Qantas lost more than five percent and Hong Kong’s Cathay Pacific shed more than three percent. Macau casino operators were also hammered in Hong Kong.

Oil prices were also sharply lower—with WTI off 2.5 percent—on concerns about the impact on demand if new containment measures were introduced.

“The one bull in the China shop that could truly derail the global recovery has always been a new strain of Covid-19 that swept the world and caused the reimposition of mass social retractions,” said OANDA’s Jeffrey Halley.

The flare-up of uncertainty also sent safe-haven currencies up with the yen—a go-to unit in times of turmoil—piling ahead against the dollar.

The greenback advanced against other units, including a 1.9 percent gain on the South African rand.

“It’s a scary headline” about the virus, so it may have caused a knee-jerk reaction, Kyle Rodda of IG Markets said.

The fact that US markets were closed for Thanksgiving on Thursday and trade would be thinner Friday “means there’s a wall of buyers missing”, meaning moves would be accentuated.

But Justin Tang at United First Partners said that, while the latest news was worrying, “the world has gone through this before with Delta” and that governments were more adept at knowing how to deal with the situation. “Mutations are expected and not something unknown,” he said.

Traders are also keeping a wary eye on the Fed as it considers its next moves to fight inflation, which is sitting at three-decade highs and threatening the US recovery.

Some officials at the bank have flagged a quicker pace of tapering its vast bond-buying programme, with a hike in interest rates possibly coming in mid-2022.

“The increased openness to accelerating the taper pace likely reflects both somewhat higher-than-expected inflation over the last two months and greater comfort among Fed officials that a faster pace would not shock financial markets,” said a team at Goldman Sachs in a note.

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