LONDON, Nov 26 (Reuters) - Wall Street stock indexes dropped at the open after the U.S. Thanksgiving break, Treasury yields slid and oil hit two-month lows as fears of a possibly vaccine-resistant coronavirus variant sent investors scurrying to safe-haven assets. read more Asian and European countries rushed to tighten restrictions on Friday after a new and possibly vaccine-resistant coronavirus variant was detected in South Africa, with Singapore and India announcing stricter border controls and more rigorous testing. read more COMMENTS: EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK After the fed minutes it seems likely everybody was expecting an accelerated Fed taper. If we continue to hear more of a greater spreading of this new variant, you might start to see that the argument will be made that no, we need to gradually exit stimulus here and we’re not completely sure how the vaccines will hold up against this and possibly more variants down the road as we’re nowhere near getting the rest of the world vaccinated.” “What has really complicated today was that we have options expiration day and extremely thin conditions, so I think ultimately when everybody is back next week, if this variant concern continues to dominate the headlines, then you’ll start to see the dollar resume its safe-haven trade.”GREG BASSUK, CEO, AXS INVESTMENTS PORT CHESTER, NEW YORK “Bottom line is this is showing that Covid is still the investor narrative, a lot of today’s movement is driven by the South African variant. We have been talking about four or five factors that have been driving the last couple of month’s activity – inflation fears, some economic data, Fed policy – but what we have seen over the last year is that big developments with respect to Covid really have ended up eclipsing some of those other factors by a substantial degree and that is what is driving today’s market activity.” “Longer-term we are very constructive and bullish on stocks having much longer legs into 2022 with the economy reopening, supply chain issues becoming more mitigated. But one thing we have seen that has been consistent in the last year and a half has been some of these more outsized impacts or developments with respect to Covid really has been the one thing that has shaken the markets to a greater extent.” “We see today’s activity and what will likely spill over into next week as a buying opportunity in the sense that it is another wrinkle here with the South African variant but while the immediate term market slides could be significant and continue into early December, bigger picture this will be a buying opportunity to move in there on this dip.” JACK ABLIN, CHIEF INVESTMENT OFFICER, CRESSET CAPITAL MANAGEMENT, CHICAGO “It is pretty amazing, we had such strong economic news come out on Wednesday. I do think there is something to this, it is obviously worth investigating. I think the latest news we heard was that they had spotted this variant in Belgium so this isn’t just isolated in South Africa. I would say initially, the vaccination rate in South Africa is very low and is probably fertile ground for these variants. It certainly begs further watching. Whatever we are going to see today is going to be exaggerated just because of a lack of liquidity.” “It certainly begs further study and looking into but my first reaction is anything we are going to see today is overdone so if we end up down a lot, it will likely turn out to be a buying opportunity.” BIPAN RAI, NORTH AMERICAN HEAD OF FX STRATEGY, CIBC, TORONTO “When you say risk-off it basically means markets are closing out extended positioning and one of the more popular trades over the last several weeks has been to be long US dollars, and I think the squaring up of that is really behind the dollar’s move for today. I don’t think it’s any sort of indication that the dollar’s lost its safe-haven status. The near-term move is mostly about extended positioning and closing those out, once that becomes a little bit more finely balanced and if we are in a risk-off scenario then I would expect the dollar to continue to outperform.” “It feels like this news about the scariant, let’s call it, because we don’t have a name for it, really is triggering a lot of risk-off tendencies across the markets. Really if we’re looking at something like this where we have new mutations on mutations of a spike protein it almost feels like the initial working assumption for most market participants is that this is a new phase of the pandemic, new lockdowns and restrictions will maybe be put in place, and it certainly feels like we’re going to need a new vaccine as well. If that is the case that introduces an additional degree of uncertainty that we didn’t take into account previously.” BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN “Like the virus, this might be something that never really goes away completely. We just learn to live with it and manage around it. It’s not the virus itself that market fear, but policy reactions to the virus. If there are new restrictions or enhanced restrictions on activity, then we could see some spillover into the next week and month. Some countries, like the U.S. and U.K., might not react to it as much as countries like China with their zero-COVID strategy. Just as supply chains looked like they were healing, this could cause some setbacks.” PETER RUTTER, HEAD OF EQUITIES AT ROYAL LONDON ASSET MANAGEMENT "This news is putting the handbrake on markets. This could be the moment that people look back on as derailing the economic recovery and rate rises. What we have is a big insertion of uncertainty rather than something material but markets don"t like that. "The very fact we don"t know, is what"s concerning the market. There is a huge range of outcomes that can happen. We could have serious lockdowns or we get no lockdowns and a booming economy." STEEN JAKOBSEN, CHIEF INVESTMENT OFFICER, SAXO BANK: "A new Covid wave is leading investors to fly to safety, provoking yields to drop roughly 10 bps across the whole US yield curve. However, we expect the bond rally to be short-lived for several reasons. First, the market has learnt through earlier new strains that Covid is temporary. Secondly, a renewal of lockdown measures would make supply chain bottlenecks worse, introducing even more inflationary pressures to the economy. Therefore, it’s necessary for central banks to stop stimulating demand, keeping intact the recent Fed’s hawkish tilt. SCOTIABANK STRATEGISTS "Given that COVID has hardly been contained globally at this point and that we do not yet know whether this new variant, with all its mutations, is a greater threat, the market’s reaction seems a little excessive. "But investors are prone to shoot first and ask question later and not stand in the way of these sorts of position unwinds. The process may have a little further to run. Recall that seasonal trends for the U.S. dollar tend to turn more negative in December; market volatility might be the sort of cover markets need to lighten up on (rates and dollar) positioning now and reassess prospects in January." SUSANNAH STREETER, SENIOR INVESTMENT AND MARKETS ANALYST, HARGREAVES LANSDOWN "Fear has gripped the financial markets with the travel industry flying into another violent storm, after the discovery of a new COVID strain which could be far more contagious and may render vaccines less effective." PETER CHATWELL, HEAD OF MULTI-ASSET STRATEGY AT MIZUHO INTERNATIONAL The European lockdowns on their own would have meant soft Q4 GDP growth, but a Q1 rebound. US, UK, Asia all looked unaffected by Europe’s problem. If the new variant does deliver its potential (usurping Delta, and reducing vaccine efficacy) we need to think about a globally soft/flat Q4 and Q1 GDP growth. Vaccine efficacy will determine the severity of lockdowns, and therefore whether this becomes another recession. RBC CAPITAL MARKETS, EUROPE: It is the threat of vaccine escape that causes the market reaction in both equities (down) and bonds (up). As long as markets are faced with a familiar virus situation that can be overcome with a sufficiently crafted and executed vaccination strategy, the reactions will be muted, as we have seen with the short-lived bond market rally last week when new lockdowns were announced in Europe. This new variant, however, creates a potential threat to the known responses and thus creates a more lasting market response. HOLGER SCHMIEDING, CHIEF ECONOMIST AT BERENBERG: At this stage, it is too early to assess the potential economic consequences. Any new wave could cause serious economic damage. As one potentially mitigating factor, the world is now on high alert and has ramped up its capacity to develop, adjust and produce vaccines. TAKASHI HIROKI, CHIEF STRATEGIST, MONEX, TOKYO "This variant is a new risk for markets. We can"t tell how far it can evade vaccines." RAY ATTRILL, HEAD OF FX STRATEGY, NAB, SYDNEY "People are reacting with the uncertainty about what this means. You shoot first and ask questions later when this sort of news erupts." MOH SIONG SIM, CURRENCY ANALYST, BANK OF SINGAPORE "We still don"t know how infectious the virus is ... it"s a general uncertainty. Markets are anticipating the risk here of another global wave of infections if vaccines are ineffective. "Reopening hopes could be dashed." MARK ARNOLD, CIO, HYPERION ASSET MANAGEMENT, BRISBANE "I don"t think there"s any going back to the pre-COVID world. We"re just going to get mutations through time and that"s going to change the way people operate in the economy. That"s just reality." SHINICHIRO KADOTA, SENIOR FX STRATEGIST, BARCLAYS, TOKYO "We see Germany considering a lockdown, so this new variant and flare-up in the COVID situation poses some risk to market sentiment in general. "If the COVID situation worsens, then dollar-yen could go down further, but otherwise the monetary policy divergence is definitely going to be weighing on the yen in the medium term." MARTIN WHETTON, HEAD OF FIXED INCOME, CBA, SYDNEY "Keep an eye on the new COVID-19 variant. None of us are virologists, but all of us have seen the impact this has had on the intended path of central bank policy and markets." JEFFREY HALLEY, ANALYST, OANDA, JAKARTA "The UK has paused flights from South Africa and five other neighbouring countries, and we can expect more of this elsewhere. The complacency seen with the emergence of the delta variant in India being a lesson harshly learned. "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. All we know so far is the B.1.1.529 is heavily mutated, but markets are taking no chances."