LONDON: On Friday, markets took a cautious break in the face of new concerns over the pace of the world’s economic recovery following COVID-19. World stocks held steady, Treasury yields bounced, and the dollar held firm. Markets have been roiled this week as an increase in instances of the Delta coronavirus type around the world stifled risk appetite and prompted a flight to safety, as some speculated that the post-pandemic reflation trade had stopped and secular stagnation was once again on the table.
“Many appear to be gradually realising that vaccination programs alone will not be enough to return economies to pre-COVID normalcy,” said Deutsche Bank analyst Jim Reid. “Cases at the global level are now ticking up again as the more virulent Delta strain spreads across the world.”
Many of the world’s main central banks are currently pursuing ultra-easy monetary policy, while some fear that this may be stopped if inflation rises and policymaker generosity is curtailed.
“Sentiment and positional shifts can have a big impact in both ways.
However, data will be crucial in the end “BlueBay Asset Management’s chief investment officer, Mark Dowding, stated.
The MSCI World index rose 0.1 percent as advances in key European bourses offset overnight weakness in Asia, but it remained on track for a weekly loss of roughly 1%.
The STOXX Europe 600 index rose 0.9 percent, recouping more than half of the previous session’s loss, but it was still on track to lose for the second week in a row.
MSCI’s broadest index of Asia-Pacific equities outside Japan fell to two-month lows overnight in Asia before recovering to trade down 0.2 percent. Stock futures in the United States were up 0.4 percent, indicating a higher opening on Wall Street. According to analysts, a series of events sparked the shift in mood. Fears that central banks will stifle economic recovery by tightening policy to combat inflation, as well as the rapid spread of the Delta strain and poor vaccination rates, have dimmed the outlook.
Stay-at-home orders were implemented in Sydney, Australia, to help stop the spread of the illness. Vietnam also imposed new restrictions, resulting in a record number of deaths across South Asia. After a dramatic drop earlier in the week, 10-year Treasury rates rebounded on Friday, rising approximately 4 basis points to 1.337 percent, though still much below the March 2021 highs of 1.776 percent. The number of Americans submitting new jobless claims increased on Thursday, adding to concerns that the job market’s recovery from the COVID-19 outbreak is still turbulent. In Europe, safe-haven German Bund yields rose a smidgeon, but were still on track for their largest two-week loss since March 2020, as investors braced for a lengthier road to recovery. The safe-haven yen increased by 0.3 percent to 110.10 per dollar, while the euro fell to $1.1837. The dollar index, which measures the value of the greenback against a basket of six currencies, rose 0.1 percent to 92.471. In a note, Thomas Flury, Head of FX Strategies at UBS Global Wealth Management, stated, “The most essential issue to address is the recent reduction in yields internationally, and what this downward trend means in terms of risk aversion and trade repositioning.” “So far, we believe markets are stuck in certain momentum trades that aren’t very persistent.” Gold, another safe-haven asset, was projected to increase for the third week in a row. It was last trading at $1,804 per ounce, up 0.1 percent. Oil prices rose again overnight as US inventories fell, but they are still on track for a weekly loss. Brent crude was trading at US$74.41 a barrel, up 29 cents. Crude oil in the United States gained 41 cents to US$73.35 a barrel. (Abhinav Ramnarayan, Swati Pandey, and Sujata Rao contributed additional reporting; Shri Navaratnam, Timothy Heritage, and Giles Elgood edited)/n
