The new week in the financial markets opens up on a negative note, as the world is now wrestling with panic over the new wave of coronavirus infections globally that is brought about by the delta variant of Covid-19.
Total infections since the start of the pandemic have surpassed 191 million worldwide. The daily infection rate is back about 500,000 per day globally, which is still not as high as seen during the peaks of the pandemic before vaccines were widely available, but the tendency is towards rising daily numbers, so it is worrisome.
The United Kingdom is a special area of interest right now, as Prime Minister Boris Johnson is really going to put the country’s vaccination program to the test by formally ending the last of the lockdowns there today. The United Kingdom is currently seeing infection rates above 50,000 cases per day, which it last observed during the peak of the pandemic in January.
The UK government has argued that even though many people are testing positive for the virus right now, thanks to widespread vaccinations people are not experiencing severe Covid-19, and both hospitalizations and lethalities are remaining low relative to the number of infected patients.
Despite the end of the lockdown, the UK might experience some economic setbacks because it is utilizing an app to track and trace people who have been in contact with anyone that tested positive for the virus, and right now thousands of people are being asked by the government via this app to self-quarantine. This means that much more people than those 50,000 or so infected are missing work at the moment.
The market’s anxiety about the pandemic is now shifting sentiment more towards safe haven assets. Among these, the US dollar is shining the brightest, with the dollar index climbing to 93.047, the highest level in three months.
Conversely, investors are also losing interest in risky assets like the euro, the pound, and US Treasury bonds. The GBP especially crashed to its lowest in months because of the spread of the delta variant of Covid-19 in the United Kingdom.
US stock indices are also on the downturn today due to the shift in sentiment towards risk aversion.
The apprehension about the pandemic is also hurting the prospects of recovery in the demand for oil, which is pushing oil prices down now that the UAE and Saudi Arabia managed to agree on the 400,000 production output increase that the Emirates previously vetoed. The WTI crude has dropped to $69.19, while the Brent crude is trading around $71.12 today.
