Financial markets around the world are waking up until the risks of another coronavirus attack.
Asian markets, hit by rising cases from Japan to India, have have underperformed their global competitors since early March, just as they appeared to be benefiting from an acceleration in the global recovery. Currencies of countries stung by the virus are underperforming those where vaccinations are emerging. And now fear is spreading, with recovery deals under pressure and US equities for two consecutive days.
“Markets that have become too comfortable with the reopening of trade and that have eased social restrictions could be jeopardized by any Covid peaks and variants,” said Paul Sandhu, head of multi-asset quant solutions Asia Pacific at BNP Paribas Asset Management. “Markets with high vaccination coverage are somewhat circumventing this downside risk.”
The World Health Organization said On Tuesday, cases are on the rise in all regions except Europe, with the biggest increase last week in Asia as India faces its biggest wave. Japan got closer to declaring a virus emergency as infections spread in the two largest and economically important metropolitan areas, Tokyo and Osaka, while Toronto health authorities will close workplaces in Canada’s largest city if they see more than five confirmed cases. to have.
The MSCI AC World Index has fallen every day this week after closing at a record high last Friday. Investors are facing the latest wave of the virus with valuations significantly higher than before the pandemic.
The resurgence of the virus “could test global assets, except those where the introduction of vaccines is very advanced,” said Joshua Crabb, a senior money manager at Robeco in Hong Kong. “It is clear that new strains are more virulent and may require booster shots for those already vaccinated.”
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On the currency front, investors this week have sought ports like the Japanese yen and the Swiss franc, rewarding those with better track records of managing the outbreak, such as the Israeli shekel and the Taiwan dollar. The Indian rupee was the worst performing currency in Asia as the new wave of infections threaten a burgeoning economic recovery.
Stocks in Asia were poised for their biggest fall in about a month on Wednesday, and US futures pulled back as investors considered the potential economic impact of the latest virus surge. Japanese stocks were among the worst performers.
“The resurgence of the virus in India and Japan appeared to be the main driver of stock sales in Asia-Pacific,” said Margaret Yang, a strategist at DailyFX. “The reflation trade seems to have taken a break and made way for safe havens and defensive names.”
– Assisted by Garfield Clinton Reynolds and Ishika Mookerjee