Warning signs for global recovery as Delta dims outlook

    People carry Primark shopping bags following retail restrictions due to coronavirus (Covid-19) disease in Belfast, Northern Ireland, on May 4, 2021. Photo: Reuters / Clodagh Kilcoyne

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    People carry Primark shopping bags following retail restrictions due to coronavirus (Covid-19) disease in Belfast, Northern Ireland, on May 4, 2021. Photo: Reuters / Clodagh Kilcoyne

    The downturn in global stock markets and a huge safety flight in the US Treasury Department this week show that investors now doubt that a much-anticipated return to normalcy after Covid is possible soon.

    Data from the United States and China, which account for more than half of global growth, point to a slowdown in the recent global inflationary pace as prices for all commodities and raw materials rise.

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    Coinciding with the resurgence in Delta’s Covid-19 variant, markets may be sending out alarm signals about the global financial outlook, Deutsche Bank chief strategist George Saravelos told customers.

    “As prices have risen, the consumer is reducing demand instead of promoting consumption. This is the opposite of what one would expect if the environment were really inflationary and shows that the global economy has a very low speed limit,” Saravalos wrote. . .

    This feeling was evident in the latest flow data. Bank of America Merill Lynch points to “drop” concerns for the second half of 2021, noting the slowdown in stock inflows and outflows from high-yield assets.

    Consumer sentiment is declining as Covid-19 cases increase

    DOLLAR APPEAL

    Weekly hedge fund data is the closest real-time indicator available to investors considering $ 6.6 trillion a day in foreign exchange markets.

    With the dollar higher than the end of March, the latest data from the Commodity Futures Trading Commission show the net positive positions in the dollar against a basket of major currencies are the highest since March 2020. The placement had fallen into a net short bet just on beginning of June .

    The appreciation of the dollar against the euro and emerging market currencies is not surprising given the financial uncertainty, said Ludovic Colin, senior portfolio manager at Vontobel Asset Management.

    “Whenever Americans worry about growing at home or globally, they repatriate money and buy dollars,” he added.

    Big US dollar bets are rising to their highest levels since June 2020

    Less value

    In recent months, investors optimistic about an economic recovery have sent a flood of cash into so-called cyclical sectors such as banking, leisure and energy. In short, these are companies that benefit from economic recovery.

    The tide can now come out.

    By contrast, “growth” stocks, especially technology, have exceeded their respective values ​​by more than 3 percentage points since the beginning of July. Many Goldman Sachs customers believe the cyclical shift was a short-lived phenomenon that led to recovery from an unusual recession, the bank said.

    Defensive stocks, such as utilities, also support. A basket of stocks compiled by MSCI is testing the lowest levels for this year against defense peers, having increased 11% in the first six months of 2021.

    Defensively back to taste as bouncing bets weaken

    YELLOW TRAINING

    Earlier this year, the dollar trajectory was determined by interest rate differences enjoyed by US debt to its rivals, with correlations peaking in May.

    While US real or inflation-adjusted yields are still higher than their German counterparts, the fall in US nominal yields below 1.2% this week has raised concerns about global growth prospects.

    Ulrich Leuchtmann, head of FX at Commerzbank, said that if global output and consumption do not return to 2019 levels soon, then a permanently lower GDP trend must be assumed. This is reflected to some extent in bond markets.

    The dollar is declining from interest rates, as the feeling of danger is jeopardized

    GLOOMIER INVESTOR?

    The investment climate has become more cautious, according to weekly polls by the American Individual Investors Association. BlackRock, the world’s largest investment manager, downgraded US stocks to neutral in its mid-year outlook.

    Stephen Jen, who manages the hedge fund Eurizon SLJ Capital, noted that because China’s turnover was ahead of that of the United States or Europe, the weakest data is filtered into the investment climate in the West.

    The investment climate is declining from the highs of 2021

    COMMERCIAL GOODS

    Popular commodity inflation is also reversing. A gold / copper ratio fell 10% after rising to more than 6-1 / 2 years in May.

    The copper / gold ratio decreases after the highs in May

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