Markets are under-weighting two economic factors, the pandemic and the war. It seems pointless to look at the Chicago National index today when probable new lockdowns in China are going to screw up global supply chains even more and cause bigger shortages and longer delays.
Covid fears battle vaccine hopes, how is it moving markets?
Geopolitical instability and inflation worries continue to weigh on markets Monday. Markets also will watch this week's Fed rate decision scheduled for Wednesday. 2354.TW Suspends production in Shenzhen; Resumption of Business depends on Govt approval; attempting to mitigate the effects of the lockdown by reassigning production to other sites - press.
New Geography has an interesting set of chart on how the pandemic affected population changes in the largest cities. CBSA stands for Core Based Statistical Areas (metropolitan areas and micropolitan areas), non-rural.
The more contagious omicron strain of COVID-19 is testing China’s zero-tolerance COVID-19 policy and while many signs underscore the strategy’s adverse impact on the country’s economic recovery, Beijing continues to stick to it, dismissing suggestions that China should learn to live with the virus as other nations do.
How covid-19 impacts markets
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.
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 late 2020, vaccination efforts allowed many major economies to fully open but the Delta variant revived concerns over new restrictive measures around mid-2021. Although countries were able to avoid lockdowns, supply bottlenecks caused by the virus outbreak started to ramp up price pressures. Central banks are looking to set their policy in a way to battle inflation while keeping the growth momentum alive.
Latest coronavirus news
Latest coronavirus analysis
Coronavirus in United States
Federal Reserve's Minneapolis head, Neel Kashkari stated that ''if supply chains don't improve as I hope, the Fed's job will get harder, and will need to do more to bring inflation down. He added that new covid waves may still be a threat to the economy.
NY Fed President and influential FOMC member John Williams said on Friday that the economic implications of the Covid-19 pandemic and war in Ukraine are highly uncertain, reported Reuters.
Federal Reserve's Thomas Barkin, following the Thursday inflation data, is speaking and said that the economy will likely return past the pre-covid trend this quarter
Coronavirus in Europe
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.