Delta variant poses growing threat to world recovery

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“One of the biggest risks to global growth . . . is that we prematurely declare victory on Covid.”

The warning in an FT interview from Mary Daly, a senior official at the US Federal Reserve, comes as evidence piles up of the spread of the Delta form of coronavirus, characterised by the World Health Organization as the “fastest and fittest” of all variants.

Although experience from countries such as the UK, where Delta cases have propelled infections to their highest weekly level since late February, seems to suggest vaccines are successful in lowering hospitalisation and death rates, concern is growing. “Delta is so much more infectious, it’s better at finding people who aren’t sufficiently immune and infecting them,” said one public health official. New research today shows the variant is especially infectious in the early stages of illness.

Pharma companies are refocusing on what they can do to halt its progress. Pfizer and BioNTech are set to begin clinical trials next month on what would be the first vaccine to be adapted specifically to the Delta version.

Meanwhile in Israel, where one of the world’s fastest vaccination programmes led the government to abandon final lockdown restrictions last month, a fourth wave of Delta-driven infections has forced a rethink. In Asia, the variant has led to new lockdowns from Seoul to Sydney. Deaths are rising in Indonesia, where the vaccination programme, which relies on China’s Sinovac, has been slow and hit by supply problems.

In Japan, Olympic events in Tokyo will be held without spectators after authorities declared a state of emergency in the city as the number of cases hit the highest level since mid-May. The most important race in the Japanese capital is now not between athletes, but between vaccines and the variant.

Read our explainer on the effectiveness of vaccines against the Delta variant.

Global economy

US jobless claims data edged higher but continued to show a recovering labour market with an acceleration in company hiring in June. Minutes from the US Federal Reserve’s policy meeting indicated it might start to curb its emergency bond-buying programme earlier than expected.

Bottlenecks are adding to fears that the UK economic recovery might be losing momentum, with goods and services growing less than expected in May, thanks to shortages in sectors such as car production. The country’s “triple-lock” guarantee on state pensions could be under threat as the government attempts to control pandemic spending. Almost 800,000 people lost their jobs last year — a quarter of a million more than previous official estimates.

Singapore correspondent Stefania Palma reports on an exodus of foreign professionals from the city state, frustrated by travel restrictions, vaccines and fears over jobs. Difficulties in finding work are coinciding with an attempt by authorities to reduce reliance on foreign labour after a Covid-19 outbreak last year swarmed through crowded immigrant housing.

Column chart of Number of foreign workers (m) showing Singapore’s foreign workforce tumbles amid Covid-19

Business

Workplaces in England will be able to ditch face masks, social distancing and other coronavirus measures as part of the grand economic reopening on July 19, the FT revealed. Acas, the UK’s Advisory, Conciliation and Arbitration Service, will be publishing guidance on working from home, ensuring workers are not discriminated against and warning businesses against “excessive monitoring”.

Despite surging crude prices, some of the biggest US oil companies are losing billions of dollars from hedging contracts signed during last year’s market lows. Oil is trading around $75 a barrel but a third of the country’s 11m barrels produced each day is fetching just $55. Our Energy Source newsletter assesses the damage to the industry from the pandemic, or as BP’s chief economist put it, “the mother of all stress tests”.

Big shale groups are selling oil below market prices

Despite signs that the UK recovery may be losing momentum, businesses are committing to more office and shop space, according to Great Portland, one of London’s leading developers. The company also improved its collection of rent to 86 per cent of what it was owed for the quarter.

Markets

European equities rebounded today as investors threw off their fears about a slowing global recovery in favour of buying opportunities ahead of what is expected to be a positive second-quarter earnings season as companies bounce back from shutdowns.

The European Central Bank’s change in strategy unveiled yesterday — its first in two decades — aims to avoid the risk of premature rate rises, one of the driving forces in the debt crisis beginning in 2011. The new approach, welcomed by the FT Editorial Board, moves the bank to a 2 per cent inflation target with greater tolerance for any slight overshoots.

The recent slump in Treasury yields is causing a rethink among investors who had previously believed strong economic growth and higher inflation would lead to higher interest rates. Our markets team looks at the knock-on effects for equities and borrowing costs for companies.

Have your say

Jonsdottir comments on Covid risks making face-to-face sectors harder to insure, regulator says:

I know this is a relatively niche industry, but I’m working on a TV production at the moment, and while everyone on it is supposed to be staying isolated from the outside world as much as possible, someone still brought Covid into the bubble, and gave it to the lead actor, who was thus put out of commission for two weeks. So filming had to be rescheduled, locations and equipment rebooked, and about a hundred-ish people to be paid for while filming was shut down. That’s a LOT of money for the production insurance to find.

Final thought

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© James Mollison

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