© Reuters. FILE PHOTO: An investor looks at an electronic board with stock information at a brokerage house in Beijing, Aug. 27, 2015. REUTERS / Jason Lee / File Photo
From Simon Jessop
LONDON (Reuters) – World stocks stabilized, government bond yields rallied and the dollar held up on Friday as markets paused cautiously amid new concerns about the pace of the global economic recovery from COVID-19.
Markets were churned this week as a spike in cases of the delta coronavirus variant globally reduced risk-taking and led to a flight to safety as some bet on post-pandemic reflation trade stalled and secular stagnation resumed was on the agenda.
"Many seem to be beginning to realize that vaccination programs alone will not be enough to bring the economy back to its pre-COVID normalcy, as cases on a global scale are now picking up again as the more contagious delta variant spreads across the world "said Deutsche Bank (DE 🙂 Analyst Jim Reid.
This contrasts with the still ultra-loose monetary policy of many of the world's major central banks, although some fear that this could be restricted if inflation picks up and the generosity of policymakers is curbed.
"Sentiment and positioning fluctuations can be powerful either way, but ultimately data will be key," said Mark Dowding, chief investment officer, BlueBay Asset Management.
The price rose slightly by 0.1% as gains on many European exchanges helped offset the overnight weakness in Asia, but remained on track for a weekly decline of around 1%.
The STOXX Europe 600 Index rose 0.9% and rebounded more than half of the previous session's decline, but is still on track, posting losses for the second straight week.
In Asia, MSCI's broadest index for Asia-Pacific stocks outside of Japan briefly hit a two-month low overnight before reducing losses and falling 0.2%. US stock futures indicated a higher opening on Wall Street, up 0.4%.
Analysts said an accumulation of events triggered the more cautious sentiment.
Fears that central banks could curb economic recovery by tightening policies to contain inflation, the rapid spread of the delta variant and still low vaccination rates have clouded the outlook.
In Australia, stay-at-home orders have been introduced in Sydney to help fight the spread of the virus. Vietnam also introduced new restrictions, with record deaths reported across South Asia.
After falling sharply earlier in the week, yields rebounded around 4 basis points to 1.337% on Friday, although they still didn't come close to reaching the 2021 highs of 1.776% in March.
A reading Thursday on the number of Americans filing new jobless claims added that the labor market's recovery from the COVID-19 pandemic continues to be bumpy.
In Europe, safer German Bund yields ticked higher but still saw their biggest two-week decline since March 2020 as investors envisioned a likely longer road to economic recovery.
For currencies, the safe haven yen rose 0.3% to 110.10 per dollar, while the euro fell to $ 1.1837.
As a result, the one that represents the greenback against a basket of six currencies rose 0.1% to 92.471. (FRX /)
"The most important issue to consider is the current decline in global returns and what this downtrend means in terms of risk aversion and trading repositioning," said Thomas Flury, Head of FX Strategies, UBS Global Wealth Management, in a note.
"So far, we believe the markets are trapped in some momentum trades that have little consistency."
Gold, another safe haven, was on the way to its third straight weekly win. It was last up 0.1% to $ 1,804 an ounce.
Oil prices added to overnight gains as US inventories fell but remain on track for a weekly loss. rose 29 cents to $ 74.41 a barrel. rose 41 cents to $ 73.35 a barrel.