Sunday, January 16

Stocks fall, bonds jump on fears over virus strain: markets wind down


Stocks, Treasury yields and oil plunged on Friday, while the yen jumped as a new strain of Covid-19 discovered in southern Africa sent a wave of caution across global markets.

MSCI Inc.’s Asia-Pacific stock indicator fell to the lowest level since early October, with Japan and Hong Kong underperforming and travel stocks among the most declining. US and European futures fell and the 10-year Treasury yield fell to 1.55%.

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The World Health Organization and scientists from South Africa are studying the recently identified variant, which has been described as very different from previous versions and of great concern. The UK, Singapore and Israel stopped travel from South Africa and some neighboring countries. Hong Kong confirmed two cases of the strain.

The dollar was close to a 16-month high, while the South African rand weakened and commodity currencies fell. Crude oil spilled more than 3% and gold rose. US markets, closed Thursday for Thanksgiving, will have a shorter Black Friday session.

The detection of the tension adds to concerns in the markets about high inflation and the prospect of a quicker exit from ultra-lax monetary environments. Global stocks are up about 16% this year, outweighing a plethora of risks after investors invested nearly $ 900 billion in exchange-traded and long-term funds alone in 2021, topping the combined total of the past 19 years. .

“It’s a scary headline” about the virus variant, so it may have caused a knee-jerk reaction, said Kyle Rodda, an analyst at IG Markets Ltd. He added that “North America off the desks means a wall of buyers is missing” . and that thinner markets lead to more pronounced movements.

Variant ‘playbook’

December futures on the Cboe Volatility Index, an indicator of implicit fluctuations in the S&P 500 equities, advanced as traders prepared for turbulence when US markets reopened.

Justin Tang, head of Asian research at United First Partners, noted that “the world has been through this before with delta,” adding that “there is already a playbook for such situations” and that “mutations are expected and not something unknown. “.

Meanwhile, economists at Goldman Sachs Group Inc. said they expect the Fed to tighten policy faster than previously anticipated, even doubling the rate at which it reduces bond purchases to $ 30 billion a month starting in January. They see an interest rate take off from near zero in June.

In China, regulators have asked top executives at Didi Global Inc. to come up with a plan to exclude themselves from US exchanges, people familiar with the matter said. That may reignite fears about Beijing’s intentions for its gigantic tech industry. An indicator of Chinese tech stocks slipped.

The Chinese economy continued to slow down in November with car and home sales slipping again as the housing market crisis dragged on, according to the Bloomberg aggregate index of eight early indicators.

Here are some of the key events this week:

  • Bank of England Governor Andrew Bailey speaks with Mohamed El Erian at a Cambridge Union event.

Some of the main movements in the markets:

Stocks

  • S&P 500 futures were down 1.2% at 6:55 am in London. The S&P 500 rose 0.2% on Wednesday
  • Nasdaq 100 futures fell 0.6%. The Nasdaq 100 rose 0.4% on Wednesday
  • Japan’s Topix Index fell 2%
  • Australia’s S & P / ASX 200 Index fell 1.7%
  • South Korea’s Kospi Index lost 1.5%
  • Hong Kong’s Hang Seng Index fell 2.3%
  • China’s Shanghai Composite Index lost 0.6%
  • Euro Stoxx 50 futures fell 2.3%

Currencies

  • Bloomberg’s dollar spot index rose 0.1%
  • The euro was at $ 1.1230, 0.2% higher
  • The Japanese yen was at 114.60 per dollar, up 0.7%
  • The offshore yuan was at 6.3925 to the dollar, down 0.1%.

Captivity

  • The 10-year US Treasury yield fell eight basis points to 1.55%.
  • The yield on Australia’s 10-year bonds fell 13 basis points to 1.74%.

Raw Materials

  • West Texas Intermediate crude fell 3.3% to $ 75.78 a barrel
  • Gold was at $ 1,801.41 an ounce, up 0.7%

© 2021 Bloomberg


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