Impact of Covid concerns on markets

Saxo Bank’s experts give their views on the impact of new Covid concerns on the financial markets

New virus strain pulls back online vs offline bets in equities

By Peter Garnry, Head of Equity Strategy at Saxo Bank

Equities markets are selling off due to new virus strain due to this strain being much more infectious than the current dominant variants, but more importantly uncertainty over how effective the vaccines will be on this new strain. This uncertainty lifts the probability of more lockdowns and travel restrictions and as a result traders selling off physical companies in energy, mining, financials and consumer discretionary against health care, utilities, and technology stocks. While overshadowed of today's risk-off event there have been several key news out on Chinese equities related to Didi Global, Evergrande, and Meituan which we cover in today's equity update.
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FX Update: Position squaring in FX as new covid strain roils markets.

By John Hardy, Head of FX Strategy at Saxo Bank

The contagion across asset markets triggered by new covid strain concerns has hit FX in the form of classic deleveraging, as euro and yen shorts are squeezed on a reversal of recent US yield rises and safe haven seeking, while the US dollar gets a pass elsewhere because it is still safer than smaller, less liquid currencies, particularly in EM. The timing is terrible for this wave of risk aversion as we have thin trading conditions over the US Thanksgiving holiday.
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Commodities challenged by fresh Covid concerns

By Ole Hansen, Head of Commodity Strategy at Saxo Bank

The commodity sector traded lower for a sixth straight week with continued losses in energy and metals, both precious and industrial, being only somewhat offset by another week of gains across the agriculture sector. Most of the damage to prices were done on Friday when the markets were rocked by the discovery of a new variant of the coronavirus, and while its potential impact remains unknown it raised concerns about the effectiveness of known vaccines.
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