"America is coming back" – these words by US President Joe Biden have sounded like a victory lap for the country's success in depressing COVID-19 cases, hospitalizations, and especially deaths. However, the picture could change quickly – at the speed that the Delta covid variant spreads.
The negative developments revolving around Covid-19 have certainly left investors on edge with caution likely to remain the name of the game over the next few days.
Covid-fears return: Risk assets tumbled across the board yesterday as covid-fears are once again returning to the forefront of investors' minds with the number of new cases increasing in different parts of the world. U.S. authorities issued a travel warning, advising travellers going to the U.K. to reconsider their plans as the number of new cases hit more than 50,000 per day over the weekend, which is only some 10,000 below the levels seen in the beginning of the year.
The outbreak of the Delta virus variant in many countries around the world once again caused the market to turn its attention to vaccine concept stocks.
The first case of Coronavirus (COVID-19) appeared in December 2019 in Wuhan, China. Since early 2020, this disease has spread rapidly, generating medical crises, overwhelming hospitals and prompting governments to enact lockdowns around the world.
During the first months, investors responded with a sharp panic-selling response to the possible economic collapse, typical to such black-swan events.
The pandemic had a wide-ranging and severe impact on financial markets, including stocks, bonds, and commodities. Governments and central banks moved to shore up the economies.
It also had a substantial influence on businesses around the world. The uncertainty related to lockdown durations and economic recovery left many businesses closed and hit households hard.
From November 2020, several companies came out with vaccines and reported impressive efficacy rates . The immunization process is has advanced rapidly in Israel, the UK and the US, but lags elsewhere. Economic figures show that the vaccine and stimulus-led economic recovery is on track, but uncertainties remain considerable.
Covid woes escalate but stocks remain mildly bid amid stimulus hopes. It’s worth noting that the COVID-19 woes also underpin the US Treasury yields. Texas marks the biggest one-day increase in covid cases since early February whereas Japan reported all-time high daily infections.
"Delta variant will have health consequences but recent waves have shown less economic implications." "Waiting to see if this is also the case with delta variant, is a reasonable expectation." "Delta may weigh on return to the labor market, we are monitoring it carefully."
New York Federal Reserve President John Williams noted that the coronavirus outbreak had an enormous shock on supply and demand, as reported by Reuters.
Despite the serious problems with the availability of COVID-19 vaccines, the vast majority of people in the United States and Europe will have been vaccinated by the summer, so the public health situation will be largely the same in these parts of the world. However, despite the homogenization of these areas, it remains uncertain how long it will take people and businesses to return to pre-pandemic conditions. Travel recovery, for example, will be slow. The European Union is likely to introduce quarantine-free cross-border crossings for those with vaccine passports, but restrictions on long-distance travel will remain in place for a long time to come.
Border controls between the vaccinated rich world and the unvaccinated poor world are likely to become stricter, especially if new mutations of the virus continue to appear.
Poor German data and renewed concerns about a default of the Chinese Evergrande property giant undermined investors’ sentiment, pushing them into the dollar’s safety.
GBP/USD is under strong selling pressure, trimming most of its post-BOE gains. Concerns about the global financial health and slow moves towards tapering weigh on markets.
Gold struggled to capitalize on its attempted intraday recovery move. Hawkish Fed/BoE, rising bond yields acted as a headwind for the metal. Resurgent USD demand exerted additional pressure on the commodity.
PBoC bans crypto trading activities and a plethora of associated services, labeling it “illegal.” Overseas cryptocurrency exchanges providing services to Chinese residents will be investigated in accordance with the law.
Equity markets remain focused on Evergrande as rumours of a possible default on overseas debt swirl. The market appears to be on the hunt for negative news, which leads us to conclude that stocks are going lower in the short term.
