(Bloomberg) -- The risk that a new strain of Covid-19 could herald the return of rolling lockdowns and widespread border closures has sent markets into a tailspin.

Equities tumbled around the world and Treasuries soared, with 10-year yields shedding 12 basis points. The market action looked a lot like a day in early 2020 when the pandemic was first spreading -- stay-at-home stocks and vaccine makers rallied, while airlines and crude oil were crushed. 

“This is a big shock for people waking up seeing the news and levels,” said Carl Dooley, head of EMEA trading at Cowen Inc. “Uncertainty and fear will remain high and maybe we aren’t going back to new highs straight away. But buying panic has been a good strategy, and based on today’s moves this is the biggest panic session of the year.”

There are still plenty of unknowns about the variant, first identified in South Africa and called B.1.1.529, but the speed at which officials have moved to ban travelers from hot spots took investors by surprise. Until today, the market narrative was all about inflation, interest-rate hikes and the end of central bank stimulus. Now, the pandemic is firmly in focus. 

Here’s how markets look on Friday: 

Reopening Trade Reversal

Anything to do with travel took the biggest hit. Cruise operators, plane makers and holiday booking sites accounted for the biggest losses in the S&P 500. A Barclays basket of European “vaccine beneficiaries” -- which includes airlines, hotels and landlords -- erased all gains for the year. 

Quality Trades Win

Drugmakers were the top winners, and any investor focused on quality or defensive positioning was a candidate to outperform. Underscoring the market’s defensiveness, a Dow Jones basket that mimics the strategy of shorting low-quality companies and buying high-quality ones, climbed 1.4%. 

Stocks geared toward a population in lockdown also rose, with Zoom Video Communications Inc. and Peloton Interactive Inc. gaining. 

Stay-at-Home Stocks, Testing Firms Rise on Variant Worries 

VIX 

Any sense of calm in the market has been replaced by anxiety. The Cboe Volatility Index, or VIX, jumped as much as 9 points on Friday morning, the biggest intraday move since February.  

Wall Street Calm Is Finally Shattered as Stock Fear Gauge Spikes

Flight to Safety

Treasuries reigned supreme as investors sought havens. Since the start of November 2020, there have only been four instances when 10-year Treasury yields fell 10 basis points or more in a single day. Two of them were due to virus-related news.

Rate Hike Bets Fade 

Money markets offloaded bets on central bank interest-rate hikes. Traders pushed back the timing of a first 25-basis-point rate increase by the Federal Reserve to September from June, while briefly pricing out any more hikes unil 2023. It’s a similar story in the U.K. where the Bank of England is now expected to tighten policy in February instead of next month.

Traders Unwind Rate-Hike Bets as New Covid Fears Spread 

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