Concerns over the global economic recovery have impacted on equity markets this week, as a result of a surge in Delta variant cases in Asia, prompting Japan to declare a state of emergency and South Korea to tighten restrictions, causing greater volatility and weakening in stocks more widely.
Bond rates have fallen as a result of these concerns, with the US 10-year yield falling for the second week in a row on fears that the recovery is in jeopardy or is simply being postponed. Much will hinge on how quickly countries with rising cases can accelerate vaccine distribution plans in order to keep the scale of the various lockdowns and travel restrictions to a minimum.
Although the FTSE100 has once again lagged behind, with the CAC40 and FTSEMib outperforming, even though they led yesterday’s losses, the Nikkei 225 posted its biggest weekly loss since May. However, markets in Europe look set to wipe out most of the losses this week as a result of today’s rebound, although the FTSE100 has once again lagged behind.
Concerns about China’s development prospects caused the People’s Bank of China to reduce its banks reserve requirement ratio by 50 basis points, indicating that the world’s second largest economy isn’t as strong as previously assumed. On the good side, Glencore and Anglo American led the way in boosting the basic resource industry and commodities prices.
Land Securities Group, one of today’s gainers, said that it had collected around 81 percent of its outstanding rent over the last three months as the UK economy reopened. The company, which owns a mix of corporate and retail properties including the Lakeside and Bluewater shopping malls, as well as Brighton Marina, said it owed GBP18 million in rent. The company also stated that a 7p per share dividend would be paid as a property income distribution on October 8th. This has given its sector peers a boost, with British Land also rising.
Despite several chip shortages that are constraining production capacity, automakers are helping the DAX after Volkswagen posted an operating profit of EUR11 billion.
Airlines have continued to recover in the aftermath of the expected relaxation of restrictions on double-vaccinated travelers, with IAG and EasyJet leading the way, as well as JET2, which is recovering nicely following yesterday’s steep drop.
Wise shares briefly surpassed 1,000p earlier today, as the positive energy from Wednesday’s successful listing propelled the stock higher, with the stock up more than 20% in its first three days of trade.
Darktrace, another great IPO from earlier this year, has continued to achieve new highs, with all of the concerns surrounding Mike Lynch’s legal difficulties, which dampened the IPO pricing, now a distant memory. The shares, which debuted at 250p in April, soared 32% on the first day of trade and are now worth more than double their IPO price, at almost 560p. It will be fascinating to watch if investors remain as enthusiastic about the company as they are today, with their latest earnings due at the end of July.
Markets in the United States have responded well to the more upbeat tone in Europe, rising higher, despite the fact that momentum was already in their favor after they closed off their day’s lows late last night.
After losing momentum yesterday, US banks are regaining ground ahead of the release of their second-quarter earnings reports next week. The industry appears to be benefiting from a comeback in yields, with JPMorgan, Citigroup, and Goldman Sachs all rising.
Levi Strauss shares rose higher as well, after the company reported better-than-expected earnings after the bell last night. Revenues were $1.28 billion, with earnings of $0.23 cents per share.
GM has also received a boost in its grade as a result of its plans to enter the electric vehicle market.
Due to their status as safe haven currencies in a week marked by high volatility in equities markets, the Japanese yen and Swiss franc have performed nicely. The US dollar has also performed strongly, as concerns over a weaker global economic recovery have aided the greenback’s performance.
The commodity currencies have recovered some of yesterday’s losses today, with the Canadian dollar benefiting from a solid June employment data, while the pound has regained some of yesterday’s losses, particularly against the Japanese yen, which has fallen dramatically.
Gold has gained for the third week in a row, owing to lower US long-term yields and weaker global equity markets, which have boosted demand for the yellow metal.
After OPEC+ failed to reach an agreement on production output increases for August, Brent crude prices are expected to fall for the first time since May./n
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