Categories: Market Overview

Delta variant’s surge brings new uncertainty to the economic recovery

The rapid spread of the delta variant has clouded the growth outlook, strategists are warning, but it’s too soon to tell how markets will react. France, the Netherlands and Spain announced new restrictions on Monday in a bid to curb surging cases of the highly transmissible variant, while the U.K. has committed to taking a leap of faith and lifting its final phase of Covid restrictions on July 19, despite rising cases.

In a research note Monday, Oxford Economics said that while global Covid cases remain relatively low, the number of economies reporting sequences of the delta variant had climbed to 89, with a growing number now identifying it as the dominant strain. It has been detected in more than 100 countries.

Ben May, Oxford Economics’ director of Global Macro Research, said market concerns about the impact of the variant on the global economy were “warranted,” warning that vaccines alone would not ensure a smooth path to economic normalcy. May said the sharp rise seen in the U.K., where the pace of the vaccine rollout has been a renowned success, could indicate that the new strain will “wreak havoc” on emerging market economies with less-advanced inoculation programs.

JPMorgan analysts suggested in a note Monday that the relative pullback for “reopening” stocks in recent months, and the dwindling hospitalization numbers in the U.K., indicate that the market may be well placed to weather the storm if the delta surge does inflict greater macroeconomic damage than first anticipated. “Even if the restrictions return, this might not be much of a surprise to the market, as the reopening plays have significantly lagged in the past months, in effect already discounting lower levels of mobility,” said Mislav Matejka, head of global and European equity strategy.

Delta variant’s surge brings new uncertainty to the economic recovery, CNBC, Jul 14

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This team of professional journalists announces the most interesting and influential articles from the major financial media as a brief summary. All such news may have sufficient potential to affect the course of trading assets.

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