In recent weeks and months there had been much talk about the complacency with which the markets were facing the main risk that loomed over the economy, which was none other than the strong rise in inflation and the consequences that this could have on the economy. parquet floors around the world. However the Red button of the alarms has not been triggered by the withdrawal of stimuli by central banks but, again, by the coronavirus. The new variant, Nu, discovered in South Africa, has revived all past uncertainties about incidence, ease of transmission and, above all, the effectiveness of existing vaccines to counteract it.
The first warning came with the futures on Thursday night, coinciding with a day of closed stock exchanges on Wall Street for Thanksgiving, followed by the Asian stock markets, which posted declines of between 2 and 3%. This augured a bad opening in the Old Continent that was confirmed with losses that reached over 4% in the EuroStoxx at the beginning of the session. In the case of the Ibex they were even around 5% when operations began. Finally, the European stocks yielded this Friday from 4.1% of the Dax 40 to 4.96% of the Spanish index. On the other side of the Atlantic, where there was only half a session, the S&P 500 was left at the close of this edition just over 2.3%.
From a strategic point of view, this drop is key as it brings the indices closer to their respective buying zones. “Last week we already pointed out to them that something was not going well in the market and that in such situations my experience told me that it was best to put the handbrake on and hence my reluctance when it comes to opening new investment ideas for add them to the Ecotrader list “, explains Joan Cabrero, advisor to the premium investment portal. “Well, this has changed after the bump we saw this Friday after the appearance of the new variant of Covid,” he adds.
“This sharp fall has caused the EuroStoxx 50 to have corrected from its last maximum that it set at 4,415 points by 7% after reaching 4,095 points this Friday; this leaves the main European benchmark just 3% from reaching what it would mean that we would once again have an extremely attractive return / risk equation to attack the market “, warns Cabrero, who concludes that” in the case of the EuroStoxx 50 we are talking about the support zone of 3,900 / 3,965 points, which are the minimums for July and October, while in the German Dax 40 the optimal buying area is at 14,800 points “.
“This news has led to strong falls in Asian stock markets, declines extended to European stock markets in a day in which investors chose to flee from their higher risk positions. We therefore expect that the stocks more linked to the economic cycle, especially those of leisure and tourism, are the most punished, while those of a more defensive and technological cut are possible that they endure something better, “they explain from Link Securities.
Safe haven assets
Investor fear translated into a drastic shift toward safe-haven assets such as bonds or gold. The main references of sovereign debt in the large economies traded with strong purchases, especially in the cases of the United States, United Kingdom and Germany.
The market came to require the T-Note American profitability below 1.50%, something that had not happened in the last two weeks. Similarly, the performance of the Bund German has fallen below negative 0.3% and is near September lows (price highs). The Spanish risk premium rose to its highest in the last 13 months, over 75 basis points. Gold, meanwhile, scored 0.7% in its most bullish session in the last 15 days.
Oil crash
Oil suffered its worst drop since April 2020, with a fall of more than 10% that left a barrel of Brent below $ 74 a barrel, a low not seen since September.
Behind this decline is the uncertainty itself generated by the new variant, which endangers part of the demand for oil while the forecast production could rise in the coming months.
Volatility rises to March highs
After many months in which calm has reigned in the stock market (except for some occasional scares derived from inflation and economic growth data), volatility has soared this Friday to almost 30 basis points in the VIX index. This level is the maximum seen since the beginning of March. However, the highest level of volatility in the stock market since the start of the coronavirus crisis was in late January, when the pandemic coincided with the retail advocacy on GameStop.
New strain of covid may cause a 180 degree turn for central banks, inflation and oil
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