Financial markets around the world are waking up up to the risks of another coronavirus.
Asian markets, affected by the growing number of cases in Japan and India, had they performed similarly globally since early March, just as they seemed to be benefiting from an acceleration of the global recovery. The currencies of nations exposed to the virus have performed less well than those in which vaccinations are on the rise. And now, anxiety is starting to spread, with recovery transactions under pressure and US stocks slipping for two days in a row.
“Markets that have become too comfortable with the relaunch of trade and weakened social restrictions may be in danger of any growth and variation of Covid,” said Paul Sandhu, head of many-Asia Pacific active quantum solutions at BNP Paribas Asset Management. “Markets with high vaccination rates somewhat avoid this negative risk.”
The World Health Organization said On Tuesday, cases are rising in all regions except Europe, with the largest increase last week seen in Asia, while India is battling its biggest wave. Japan has approached the declaration of a virus emergency, as infections have spread to the two largest and most economically important urban areas, Tokyo and Osaka, while Toronto health authorities will order the closure of work in the largest city in Canada, if they have more than five confirmed cases.
The MSCI AC World index fell every day this week after closing at a record high last Friday. Investors are facing the latest wave of the virus with significantly higher ratings than they were before the pandemic.
The revival of the virus “could test global assets, except for those where vaccine launches are very advanced,” said Joshua Crabb, senior money manager at Robeco in Hong Kong. “Clearly, the new strains are more virulent and may require booster photos for those already vaccinated.”
Investors too eager to bet The pandemic impact will disappear: macro view
In terms of foreign exchange, investors this week sought havens, such as the Japanese yen and the Swiss franc, and rewarded those with better experience in managing the outbreak, such as the Israeli shekel and the Taiwan dollar. The Indian rupee was the weakest currency in Asia as a new wave infections threaten a born economic renaissance.
Shares were set for their biggest decline in about a month in Asia on Wednesday, and US futures were withdrawn as investors looked at the potential economic impact of the latest wave of the virus. Japanese stocks were among the weakest performers.
“The rebirth of the virus in India and Japan seems to be the main driver behind the sale of Asia-Pacific stocks today,” said Margaret Yang, a strategist at DailyFX. “The trade in inflation seems to have taken a break, giving way to safe havens and defensive names.”
– With the assistance of Garfield Clinton Reynolds and Ishika Mookerjee