Coronavirus new variants and markets’ reaction! 

Shortened day and Financial markets! 

Market analyst – IFC Markets

The news about the latest coronavirus variants changed all financial outlooks. Market risk increasing and this is why we can see this drop here. 

Stock Markets suffered their sharpest drop in the past two months so far in all Asian, European, and US futures, to send investors scurrying toward the safety of bonds, the yen, and the dollar.

So far, Japan’s Nikkei lost 2.5%, Shanghai and Hang Seng also closed by 0.6% and 2.7% lower. EU season also started with negative sentiment with more than 3% loss on average. The same negative sentiment also is going on in the US futures market with a 1.5% loss on average. 

Risky assets like Stock Markets, and Oil are falling, while safe-havens like Gold, Japanese Yen, and Swiss Franck are in bid. Oil fall more than 6% so far and as long as we do not have the updated information about this variant of coronavirus, the risk sentiment of the market will be high and we will have caution all across the markets. 

The economic calendar does not have any high-tier data to release and investors will remain focused on risk perception ahead of the weekend.

Market reaction:

US Stock Markets: The slew of stronger-than-expected US economic data that will push the Fed to increase the funds’ rates even two or three times in 2022. This is not in favor of stock markets. On the other hand, if the news about the latest coronavirus become more highlighted and market risk increase, it is also will not be in the favor of stock markets. Therefore with any scenario, we can see the downtrend in the stock markets, just the strength of the trend will be matter. 

Gold will be in demand, no matter which scenarios that we talked about above, however higher numbers depend on two factors, the risk level, and the USD rate. Stronger USD will limit the bull’s power.

Oil will be under pressure with increasing the market risk, if news by Monday confirms that this variant is dangerous enough to have some restrictions and lockdowns, then we can see lower levels in the market, otherwise, it is just creating a buy area. 

Cryptocurrencies: Crypto market already was under pressure with the legalization process, this market risk just will increase the speed of bears. In general, the outlook is still bearish for this market. 

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