FirstFT: Global markets shaken by fears over Delta variant

Global stock markets suffered their worst day for months yesterday as the resurgence of the Covid-19 Delta variant forced a rethink about the outlook for growth.

In England, yesterday’s so-called Freedom Day was overshadowed by a humiliating U-turn for prime minister Boris Johnson who was forced to self-isolate after coming into contact with his health minister who contracted the virus.

Infection rates are also rising in the US just as the inoculation campaign loses momentum, raising the risk that new restrictions may be needed to prevent healthcare services becoming overwhelmed.

Stocks sensitive to the economic recovery were hardest hit. Airlines, transport companies, material and chemical stocks all experienced heavy losses as well as small and midsized companies. Stocks for US banks, which lend more as the economy expands, have fallen 14 per cent from a June high.

Line chart of Performance since May 10, when index hit a record (%) showing Dow Jones Transportation Average slides into correction

Meanwhile, there has been a surge in demand for put options, which protect investors against falling stock prices. Safer bets like Treasuries have seen prices surge and yields fall. The yield on the benchmark 10-year Treasury bond fell below 1.2 per cent yesterday, the lowest level since February.

“Monday was ugly” writes Rob Armstrong in today’s Unhedged email. He goes through the key themes of the sell-off and what it tells us about the outlook for the rest of the summer in financial markets.

This is the view of Mike Lewis who is head of US equities cash trading at Barclays:

“It is clear investors are thinking the recovery may take a little bit longer and the reopening trade may not be as attractive.”

After yesterday’s pullback today is looking more promising. Stocks are up in Europe despite a sell-off in Asia overnight. US futures are pointing to a slightly higher open as well.

Five more stories in the news

1. China hits back at US-led accusations over cyber attacks China has challenged US-led accusations that Beijing was at the heart of a wave of global cyber attacks, including an offensive against a Microsoft email application that affected tens of thousands of organisations. The White House and its western allies yesterday accused the Chinese government of teaming up with criminal gangs to commit widespread cyber attacks.

2. Leon Black rejects claims he raped a Russian model Lawyers for the billionaire founder of Apollo Global Management yesterday forcefully rejected claims he raped and harassed a young Russian model, calling Guzel Ganieva a “fabulist” and her lawsuit “a work of fiction”.

3. Biden will not back down on climate plans Joe Biden will not back down from putting climate change at the heart of his legislative agenda, his top environment official has said. Michael Regan, the head of the Environmental Protection Agency, told the Financial Times he believed the US president would not let his climate agenda be derailed by some of the moderate Democrats in Congress. 

4. Robinhood seeks valuation of up to $35bn in IPO Online brokerage Robinhood is seeking a valuation of up to $35bn in its initial public offering, one of the most hotly anticipated stock listings of the year. Robinhood is offering about 55m shares of its class A common stock at between $38 and $42 as it seeks to raise more than $2.3bn, the company said in a filing.

5. Pedro Castillo finally confirmed as Peru’s next president The leftist candidate was finally confirmed as Peru’s next president, more than six weeks after a second-round poll. After one of the longest and most bitter electoral battles in the country’s history the National Electoral Jury last night confirmed Castillo’s victory in a televised address.

  • Haiti latest Claude Joseph, Haiti’s interim president who took charge after Jovenel Moïse was assassinated earlier this month, has agreed to step aside under diplomatic pressure and hand over power to a rival.

Coronavirus digest

  • China’s commitment to achieving zero Covid-19 cases means most of its citizens will probably be cut off from the outside world until the year-end or even partway through 2022, according to analysts.

  • The US Centers for Disease Control and Prevention yesterday urged Americans to avoid travel to the UK.

  • Canada will begin to allow fully vaccinated American tourists from early August and vaccinated travellers from other destinations in September.

Follow our live coronavirus blog and sign up for our Coronavirus Business Update newsletter for more Covid-19 news.

The day ahead

Out of this world Jeff Bezos will take off from the West Texas desert today aboard the Blue Origin rocket for a trip to the lower reaches of space. The Amazon founder will be flying with his younger brother Mark, 82-year-old aviator Wally Funk and 18-year-old Dutch student Oliver Daemen.

Earnings Streaming giant Netflix releases second-quarter results today. Also reporting are Philip Morris International, which recently bought UK inhaler group Vectura, Chipotle and oil services group Halliburton.

Cyber security hearing The US House Energy and Commerce subcommittee meets to examine the threat of ransomware.

Brussels warning The European Commission is to warn of increasing threats to judicial independence and to the fight against official corruption in Hungary and Poland.

What else we’re reading

‘There are possibilities everywhere’ A profound shift is under way in the US labour market. American employers have historically been able to dictate terms to their workers but now companies are desperate to hire staff as continuing fears about the pandemic, a lack of childcare and a temporary expansion of unemployment benefits have kept many workers on the sidelines. People looking for work hold more bargaining power with prospective employers than they have in decades.

Line chart of Average lowest wage respondent would be willing to accept for a new job (in thousands of USD) showing The 'reservation' wage that employers must offer to entice workers has jumped this year

Two big reasons to doubt the global boom Though economists expect a roaring reopening of the global economy, there are two reasons to question its strength and length: China and the US. The superpowers are the locomotives of growth, but cracks are appearing in their economic engines, writes Ruchir Sharma.

China is still a long way from being a superpower If China is unable to achieve a global military presence that rivals the US, it may have to find a new way of being a superpower, argues Gideon Rachman. Historically wars have tended to be the means by which new superpowers emerge and remake the world order, he says.

Pandemic delivers transformation for packaging industry The explosive growth of deliveries during the pandemic has alerted investors to unglamorous business of cardboard boxes, a $350bn paper-based packaging industry at the heart of the ecommerce economy.

Why Gabon wants markets to help tackle climate change As oil reserves dwindle, Gabon is seeking to reposition itself as a “green superpower”. The rare high-income country in Africa wants recognition for preserving its tropical forests, the planet’s most important forest ecosystem after the Amazon. So how does it plan on gaining “natural capital”?


When it comes to summer suits, creased is the word Like so many things, the summer suit is heading for reinvention in the shape of separates, updated seersucker, finally learning to love the creasing of linen and, if in doubt, paired with plimsolls. Nicholas Foulkes explains how men are embracing the post-lockdown art of casual dressing up.

Matt Damon (left) and Jude Law in ‘The Talented Mr Ripley’ (1999)

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