Amid concerns that the mutated virus could escalate in major countries globally, potentially triggering a new round of widespread prevention and control lockdowns, which would, in turn, weigh on growth prospects, global markets entered risk-off mode overnight. European and US stock markets fell broadly, particularly in Europe where the pandemic has seen repeated outbreaks, with significant declines; Germany and France’s stock markets plunged nearly 3% at one point. The US Dow Jones index dropped 2.1%, marking its worst single-day performance since October last year. The Nasdaq and S&P 500 also saw relatively smaller declines, falling 1% and 1.6%, respectively. The reaction of the 10-year US Treasury was especially pronounced, plummeting more than 10 basis points to 1.19%, essentially erasing all gains since early February. The US Dollar Index strengthened above 93, driven by both safe-haven demand and greater damage in Europe, further pressuring gold. International oil prices plunged 6.5%, adding further panic to the market.
Market adjusts amidst variant virus concerns, but expectations of a reversal or even halt in the recovery process are overly pessimistic
►Looking solely at the market's own performance and reactions, the sudden plunge did not have many direct 'precursors' or catalysts. It cannot be ruled out that the market is using the concerns over the variant virus as an opportunity to adjust. We suspect the market might be taking advantage of accumulated gains from earlier periods to adjust accordingly. It’s possible that the market may need some time to digest these factors while observing whether more negative elements come to light, but as long as there isn’t a continuous sharp decline triggering new panic, we expect the overall level of turmoil should remain manageable.
For industrial commodities, under the backdrop of recurring outbreaks overseas, industrial metal prices may face short-term pressure, but China’s manufacturing...