Warning Signs For Global Recovery As Delta Dims Outlook
- ByAyushi Ray | July 23, 2021
Warning signs for global recovery as Delta dims outlook. A drubbing in world equity markets and a huge flight to safety into U.S. Treasuries this week suggests investors now doubt that a much-anticipated return to post-COVID normality is feasible any time soon. Data from the United States and China, which account for more than half of world growth, suggests a slowdown in the recent blistering pace of the global economy alongside rising prices for all manner of goods and raw materials. Coinciding with a resurgence in the Delta variant of COVID-19, markets may be sending alarm signals about the global economic outlook, Deutsche Bank chief FX strategist George Saravelos told clients. As prices have risen, the consumer has been cutting back demand rather than bringing forward consumption. This is the opposite of what one would expect if the environment was genuinely inflationary and it shows the global economy has a very low speed limit,” Saravelos wrote.
Bank of America Merill Lynch flagged “stagflation” concerns for the second half of 2021, noting slowing inflows into stocks and outflows from high-yield assets. Data on hedge funds’ weekly currency positioning is the closest available real-time indicator of investors’ thinking about the $6.6 trillion a day foreign exchange markets. With the dollar at its highest since end-March, latest Commodity Futures Trading Commission data shows net long positions on the dollar against a basket of major currencies is the biggest since March 2020. Positioning had dropped to a net short bet as recently as early June. Dollar appreciation against the euro and emerging market currencies is unsurprising given economic uncertainty, said Ludovic Colin, senior portfolio manager at Vontobel Asset Management. In recent months, investors optimistic about an economic recovery sent a flood of cash into so-called cyclical sectors such as banks, leisure and energy. These are, in short, companies that benefit from an economic recovery.
Follow Startup Story
Related Posts
