Published: April 26th, 2021
Asian equities and U.S. stock futures dropped on Wednesday, April 21, following fears of resurging coronavirus cases in some countries. The panic cast aspersions on the overall strength of the global economic recovery and the demand for crude oil.
On Wednesday, April 21, Asian stocks and their U.S. equities futures counterparts shrunk over concerns of resurging coronavirus infections in most countries. The panic cause doubts over the overall strength of the recovery of the global economy and the foreseen demand for crude oil.
The broadest index for Asia-Pacific shares on the MSCI that excludes Japan lost 0.6%. Meanwhile, Australian stocks shrunk by 1.25%, while shares in China were down 0.46%. Stocks in Tokyo lost almost 1.8% over growing fears that Tokyo, Osaka, and their neighborhoods would go into lockdown because of the new wave of coronavirus infections. The S&P 500 e-mini stocks futures bled almost 0.2%.
Meanwhile, crude futures continued their steady drop from a one-month high in Asian trading over fears that new coronavirus infection in India, the globe’s third-largest buyer of oil, would compromise energy demand.
Recent optimism because of the ramped-up vaccination exercises in the U.S., Europe, and Britain, is quickly turning into concern that the new record coronavirus infection in India coupled with reinforced travel restriction would stall the recovery of the global economy.
An analyst at the Commonwealth Bank of Australia said that fresh concerns about the recovery of the global economy affected both commodity prices and commodity currencies. Countries such as India and Brazil etched new records of cases and deaths, the analyst added in a note to customers.
The note said that as long as coronavirus persists, the fear of virus mutants developing remains real, and these mutants might spread to other counties.
The poor performance of the Asian stocks followed a bleak day on Wall Street. Indexes led by the Dow Jones Industrial Average lost 0.75%. The S&P 500 index lost 0.68%, while the Nasdaq Composite was down 0.92%. The drop in the Nasdaq was exacerbated by investors who sold airline and travel-related stocks over fears of stagnated recovery in global tourism.
U.S. crude lost 0.4% to stand at $62.42. Brent crude dipped 0.26% to etch $66.40 per barrel.
Most tech shares that increased because of the stay-at-home demand could come under further pressure. Netflix Inc. reported below par subscriber growth for its movie streaming service. The disappointing news pushed the shares down by 11%.
The fall in crude oil prices continued as gloomy news coming out of India showed no signs of abating. The country, which is the second most populous in the globe, also doubles as the third biggest importer of crude oil.
It reported its worst death toll from coronavirus-related complications in 24 hours on Tuesday, April 20. And, the struggle in the heavily populated Asian country continues. In the 72-hour period that ended on Saturday, April 24, the country had more than 1 million new coronavirus cases, the highest in any country since the pandemic started.
Large parts of India are now under strict lockdown measures.
Meanwhile, the Canadian dollar, the Norwegian crown, and the Mexican peso steadied in the latter days of the week that ended on Saturday, April 24, after falling on Tuesday, April 20. However, analysts predict that despite the slight upsurge, more currencies might slump in the coming days. Currencies of major oil exporters might come under pressure if the oil prices maintain a downward trajectory.
The dollar index dropped very close to a seven-week low against a basket of six major currencies. The greenback’s performance has been affected by the decline in the U.S. Treasury yield. In the week ending on Saturday, April 24, an increasing number of investors sought the comfort of including government debt in their portfolio.
Stanley White, a columnist for Reuters, said that most of these investors closely watched the 20-year Treasuries floated on Wednesday, April 21. As an important measure of the global market’s demand for fixed income, the auction showed strong demand for the 20-year bonds. However, the event left the yields range-bound, said White.
Before the auction, the yield on the benchmark 10-year U.S. Treasury bonds stood at 1.5660%, nearly a six-week low. The yields on their 20-year counterparts were at 2.1531%, which is equivalent to a seven-week low.
The numbers remained largely unchanged after the auction despite the immense demand for the 20-year Treasury bonds. Analysts said they expect the pattern to persist until the government releases economic data on Thursday, April 29.
According to analysts at JPMorgan Chase, the markets seem to be on a risk-aversion trend. The biggest sign of this risk-loathing attitude manifested when spot gold was exchanged at $1,778.18 per ounce on Thursday, April 22. The figure is only slightly shy of the seven-week high that the commodity etched on Monday, April 19.
The strategists led by Mislav Matejka argue for a possible breakout in bond yields. They also believe that stocks and equities would manage to tolerate the yields’ reprisal as long as the growth-policy trade-off stands as it is.
They think the phase of activity pickup is right ahead. The analysts’ belief is affirmed by obvious signs the market is manifesting. According to them, excess liquidity would possibly be in excess in the coming months. Besides, policymakers are likely to make a bias towards the side of caution.
U.S. gross domestic product is projected to increase by almost 7% annualized between January and March. This impressive figure comes in the wake of a more moderate 4.3% growth in the last quarter of 2020.
Other reports in the week that began on Monday, April 26, might indicate a pickup in consumer confidence and increased personal spending. Recent indicators back economic optimism. Orders for durable goods rebounded in March, while service providers and manufactures’ output attained a record high in April. These figures show that stocks have better days in the coming weeks.