Global stockmarkets pause for breath
Global markets plunged on Monday as investors feared the Covid-19 Delta variant could derail the recovery.
“There is now a feeling that the UK could be staring at a fresh Autumn lockdown,” says Susannah Streeter of Hargreaves Lansdown. “Far from giving investors a jolt of confidence, Freedom Day has seen it evaporate, as sharply rising infection rates disrupt businesses.”
The pandemic strikes again
Global markets plunged on Monday as investors feared the Delta variant could derail the recovery. The FTSE 100 fell by 2.3% to close below 7,000. The FTSE 250 dropped by 2.2%. Aviation and leisure stocks were among the worst hit.
The pan-European Stoxx 600 had its worst day of the year so far. America’s S&P 500 retreated by 1.6%. The US ten-year Treasury bond yield fell to 1.18% as prices rose, the lowest level in five months. Japan’s Nikkei 225 index hit a six-month low on Tuesday.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The message from bond markets seems clear, says John Authers on Bloomberg. “Forget about the inflation scare” and “abandon hopes for a strong reopening and economic recovery”. That might seem surprising given recent inflation data, but the Delta variant is driving an enormous surge of cases in the UK.
Only high vaccination rates are preventing another devastating wave of hospitalisations. That bodes ill for places with low vaccination rates, not least parts of the US. The spread of the Delta variant is an especially urgent worry in emerging markets, says William Jackson of Capital Economics. Asia is currently in the eye of the storm. Low vaccination rates mean “much of Latin America” and “other parts of Asia and Africa” look vulnerable, which will slow down their recoveries.
Markets pause for breath
The FTSE’s wobble is a reminder that “escape from an unfree, restricted economy is likely to be a messy affair”, says Nils Pratley in The Guardian. The “pingdemic” is hitting everything from pubs to factories. We still don’t know for sure whether “the lifting of most coronavirus restrictions really will be ‘irreversible’”. As Deutsche Bank puts it, this is all something of an “experiment”. While we wait to see the results, expect “a volatile summer for stockmarkets”. Don’t panic – markets are just entering the “mid-cycle”, says Andrew Sheets of Morgan Stanley. After a very strong recovery over the last 16 months it was inevitable that things would cool down at some point. Never mind the growth worries, “we think that the global recovery will keep pushing on”.
“The easy money has been made in this market,” says Nicholas Jasinski in Barron’s. Wall Street’s favourite “buzzy phrase” right now is “peak growth”. The idea is that growth in “corporate earnings, US gross domestic product, stock prices… and inflation” have all peaked for the cycle.
While the first stage of the post-pandemic rebound lifted all boats, investors must now be more discriminating. They will look for stocks that can “stand the negative impacts of hot inflation and shifting monetary policy”. The answer? Big Tech, out of favour for much of this year, could soon be back in vogue.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.
Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.
He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and Emerging Markets, where his experience living in Beijing and conversational Chinese prove useful.
Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.
-
Nationwide hikes FlexPlus current account fee by £5 a month – is it worth it?
Nationwide’s FlexPlus current account is a favourite with customers, but it’s worth checking whether you are taking advantage of the perks after the monthly fee went from £13 to £18
By Katie Williams Published
-
Santander launches online pension that offers up to £1,000 cashback
Santander's self-invested personal pension offers customers cashback of up to £1,000 if they invest before 25 April next year - here is everything you need to know
By Chris Newlands Published
-
Warren Buffet invests in Domino’s – should you buy?
What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
By Dr Matthew Partridge Published
-
4Imprint makes a strong impression – should you buy?
4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
By Dr Mike Tubbs Published
-
Invest in Glencore: a cheap play on global growth
Glencore looks historically cheap, yet the group’s prospects remain encouraging
By Rupert Hargreaves Published
-
Should you invest in Trainline?
Ticket seller Trainline offers a useful service – and good prospects for investors
By Dr Matthew Partridge Published
-
Key takeaways from the MoneyWeek Summit 2024: Investing in a dangerous world
If you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
By MoneyWeek Published
-
DCC: a top-notch company going cheap
DCC has a stellar long-term record and promising prospects. It has been unfairly marked down
By Jamie Ward Published
-
How investors can use options to navigate a turbulent world
Explainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
By James Proudlock Published
-
Invest in Hilton Foods: a tasty UK food supplier
Hilton Foods is a keenly priced opportunity in an unglamorous sector
By Dr Matthew Partridge Published