Investors moved away from risky assets on Monday as a rise in worldwide coronavirus cases crushed bond yields and left stocks facing losing streaks, with Wall Street falling more than 1%.
New Covid-19 cases rose in England and Asia, with US infections soaring 70% last week, dampening optimism on the economic recovery. The 10-year yield fell 8.7 basis points to 1.212%, a low last seen in February, while the S&P 500 fell for a third straight session.
“Investors shed risk assets in early morning trading amid fears of a surge in Covid infections that have the potential to curtail global growth,” said Peter Essele, head of investment management for Commonwealth Financial Network, in an e-mailed statement.
“The risk aversion was most pronounced in the 10-year treasury yield, which fell to its lowest level since the early days of 2021.
“Fear of stagflation will be a major concern for investors if a resurgence in Covid infections causes economies to slow while consumer prices continue an upward trajectory,” Essele said.
The Dow Jones Industrial Average dropped more than 2% mid-morning on Monday, with the S&P 500 falling 1.5%. The Nasdaq Composite fell nearly 1%. MSCI’s all-country world index, a gauge of global shares, was down 1.71%.
In a sign of continued implications of the pandemic, Britain’s “freedom day,” ending over a year of Covid-19 lockdown restrictions in England, was marred on Monday by surging infections, warnings of supermarket shortages and British Prime Minister Boris Johnson’s own forced self-isolation. Britain’s fully vaccinated health minister also contracted the virus.
Europe’s Stoxx 600 slid over 2% in its worst session in seven months. London’s FTSE fell a similar amount to the lowest since mid-May.
Natwest’s Global Head of Desk Strategy John Briggs said rising Covid-19 cases would focus markets on which countries had the highest vaccination rates, their appetite for social restrictions and their fiscal appetite.
Oil slumps 6%
Oil prices plunged more than $4 a barrel on Monday, headed for its worst day since March, after OPEC+ agreed to boost output, stoking fears of a surplus as rising Covid-19 infections in many countries threaten demand.
Crude oil’s year-long surge has been sputtering for most of the last two weeks with the prospect of new supply undermining the case for higher prices. With the Delta variant of the coronavirus spreading, funds bailed out of long positions on Monday. Brent crude lost $4.23, or 5.8%, at $69.36 a barrel by 1508 GMT. US oil futures were down $4.56, or 6.4%, at $67.25 a barrel.
The Organisation of the Petroleum Exporting Countries and their allies, known as OPEC+, reached a compromise on Sunday to increase oil supply from August to cool prices, which had hit their highest level this month in more than two years.
Published in The Express Tribune, July 20th, 2021.
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