In scenes reminiscent of early 2020 and the first wave of the Covid pandemic, world markets sold off heavily on Monday as the number of Delta variant infections swelled to worrying levels in the US, Australia, UK, Japan, and other parts of Asia and Africa.
The way share prices fell, bond yields slid and commodities like gold and oil sold off reveals the growing fears of investors that the faster-spreading variants of the virus may crunch the strong recovery in the global economy and individual economies such as Australia’s.
Sharemarkets sold off in every major economy – Wall Street saw worse day since May, The Stoxx Europe 600 dropped 2.3%, its sharpest fall this year. Markets in Hong Kong and Japan also ended the day lower.
The slump left the ASX futures market looking at a 70 point plus fall at the opening (it was down more than 90 points before 6am) to go with the 62-point slump on Monday
The fall will be concentrated in airline, travel, tourism and related stocks, as well as energy shares (Woodside, Santos, beach and Oil Search).
The negative sentiment will even hit the banks which would be looking to rise in the wake of the ANZ Bank’s surprise $1.5 billion share buyback snuck out just before 7pm on Monday.
The Dow fell 725.81 points, or 2.09%, to 33,962.04 (it was down more than 900 points at one stage), the S&P 500 lost 68.67 points, or 1.59%, to 4,258.49 and the Nasdaq lost 152.25 points, or 1.06%, to 14,274.98.
All 11 major sectors in the S&P 500 closed deep in negative territory. Energy shares, weighed down by plunging crude prices, fell 3.6%, their worst day since March.
The S&P 1500 Airline index slumped 3.8% and the S&P 1500 Hotel and Restaurant index closed down 2.7%.
The slump in markets perhaps explains why the world’s key bond yield – the rate on the 10-year US Treasury has been weakening for the best part of a month now.
That continued Monday with the 10-year yield sliding to a low of just over 1.18%. It recovered slightly to trade around 1.20% (down 9 points for the session) in early Asian dealings.
The yield on the Australian 10-year bond also fell – to 1.24% – and the Aussie dollar sold off and was trading around 73.43 US cents early Tuesday in Asia.
Oil prices slid sharply, slumping under $US70 a barrel in New York In the wake of the deal by the OPEC+ group to gradually expand the global production cap from now into 2022.
WTI was down to just above $US66.50 a barrel just before 7am a fall of more than 7%. Brent crude was down a similar amount at just over $US68 a barrel.
Comex gold was down – by ‘only’ around $US2 to $US1,813 an ounce, Copper lost more than 3% and silver also sold off.
Iron ore prices were mixed – the price of 62% Fe fines delivered to northern China eased 39 cents to $US221.04 a tonne, the price of 58% fe fines rose 70 US cents to $USUS182.27 and the price of 65% Fe fines from brazil eased 70 US cents to $US255.90 a tonne.
Much of it is related to the Delta (variant),” Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago told Reuters.
“There’s some concern too that maybe the economy is not going to open up as quickly as everyone thinks, and the big boom that everyone’s expecting is going to be more of a pop than a boom.”
“Global availability of the vaccine has been an issue from day one.” Nolte said. “That’s been out there for a long time. This is the latest iteration of that. We still have a long way to go.”
