While nations across the globe are now easing their respective lockdown measures, the fears of a second coronavirus spike have continued to inform their decisions.
These fears appear to have been borne out recently, after a raft of new cases were reported in Beijing at the beginning of the week. This saw the region quickly impose a local lockdown and several familiar control measures (such as renewed testing), while the WHO reaffirmed that more than 100,000 cases a day have been reported globally during the last two weeks.
In this post, we’ll look at how this is impacting on the financial markets, and what the outlook is for various asset classes in the near-term.
How Have the Markets Fared so Far?
Even before the second spike in Asia, the markets and major indexes such as the Dow Jones futures were trading lowers amid spiralling case numbers in the US.
Of course, these cases weren’t necessarily caused by a so-called ‘second spike’, primarily because both state and federal authorities have struggled to curb the spread of the pandemic nationwide from the outset.
At the same time, nations such as Brazil and India are continuing to record spikes in daily deaths, with more than 2,000 passing away in the latter nation in just 24 hours recently.
Now that we’ve also seen a major increase in regions such as Beijing, however, there’s an undeniable level of risk aversion in the markets, while the potential damage to economies that have recently reopened has caused sustained volatility in currency and share price movements.
Make no mistake; an entire raft of indexes and asset classes have seen their value decline overall over the course of the last week, particularly those pertaining to the Asia-Pacific region.
Commodity prices such as oil have also fallen after a recent rebound, while even Bitcoin (which is considered a relative safe haven in the current climate) currently under pressure.
Is There any Room for Optimism?
Despite these bleak findings, there are a number of factors inspiring hope that the markets can rebound in the medium and longer-term.
For example, global sentiment has now begun to soar on the back of UK drug trial results, which discovered a potentially effective treatment for the treatments of Covid-19. This saw the FTSE 100 end nearly 3% (or 180 points) higher, while the Dow Jones Industrial Average climbed by 2% in 24 hours.
According to Oanda’s Senior Market Analyst Jeffery Halley, China’s Sinovac Biotech also reported positive recent results for its prototype Covid-19 vaccine. This will now move to phase III virus trials in troubled Brazil, easing market concerns both in Asia and across the globe.
These developments provide hope that the recent market decline may be little more than a temporary blip, so long as Beijing and cities across the globe can impose effective regional lockdowns and prevent a worldwide second spike.