The euro took a dive to $1.1283, heading back to the days of July 2020 hitting low this week as the dollar surged 0.5%. The equity market closed low as the European and U.S. bonds fell 5-6 basis points.
European stocks fell from record highs. The government bond, the oil prices, and the euro collapsed on Friday amidst fresh COVID-linked lockdown in Germany and other parts of Europe as it casts a new shadow over the global economy. As Australia became the first country to reimpose a total COVID lockdown to battle the new wave of fresh infections, the news has affected the market. Germany could also follow suit.
Jens Spahn, Germany’s health minister, warned that a lockdown could be imminent even for those already vaccinated. As a result, the situation in Europe’s biggest market has turned grim. A senior portfolio manager at Swiss asset manager Vontobel, Ludovic Colin, said that a total lockdown in Germany would be bad news and could hamper the economic recovery.
He added that the current situation was similar to those in July and August when the world was gripped again by the COVID-19 virus Delta variant slowing down the recovery. The news made everyone race towards so-called safe assets like government bonds, dollars, and the yen.
As the growth-sensitive banking stock fell 3% down, the pan-European index STOXX 600 fell one fourth of a percent with Italian along with Spanish shares plunging down more than 1%. The shares later recovered predictably after the fall.
There was a ripple effect in the market worldwide, with Wall Street Futures registering a low along with Brent crude futures dropping below $80, further extending the losses.
Opportunity for the Safe-Heaves to shine.
The Japanese Yen regrouped a third of a percent against the dollar to 133.93, and the dollar index surged again to 16-month highs, which were recently recorded.
The government bonds regrouped after recently battling high inflation and expectations for a higher rate of interest.
The country’s entire yield curve entered negative territory as it took Germany’s 30-year bond below 0% for the first time since August.
The euro area benchmark, Germany’s 10-year yield, fell beyond the previous low recorded since mid-September at -0.33%, with five basis points down after the day started touching higher.
The U.S. and British yields fell 3-5 basis points down.
Alibaba’s domino effect on the Asian markets.
As the e-commerce giant Alibaba registered disappointing earnings, which further reinforced the fear regarding slowing down of growth of the Chinese economy as the day started in a gloom in Asian market.
Alibaba registered a 10% loss affecting MSCI’s Asia-Pacific index excluding Japan which fell 0.44%
The downward trend continued as the poor performance of Baidu and Bilibili shares were suspended. With the diving down of Bitcoin to a lowest point since mid-October, it set for its worst week in six months below 20% recent record highs.