Delta concerns hit oil and emerging markets

London/Hong Kong — Stocks and emerging markets currencies edged down on Friday and oil headed for its biggest weekly loss since March, as nervousness over the spread of the Covid-19 Delta variant hit risk assets and crimped demand.

A key jobs report due later in the day is expected to deliver further signs of growth in the US, soothing some of those concerns about the global economy and further boosting the rising dollar.

The benchmark Stoxx index of European shares opened down 0.1%, after earlier falls in MSCI’s broadest index of Asia-Pacific shares outside Japan as Chinese blue chips suffered from uncertainty over government policy.

The Thai baht led losses among emerging markets currencies, emblematic of how a surge in coronavirus infections and deaths in some countries around the world is hitting confidence in their currencies and economies.

China on Friday reported 124 confirmed cases on Thursday, its highest daily count for new coronavirus cases in the current outbreak, fuelled by a spike in locally transmitted infections. Authorities have imposed travel restrictions in some cities.

Thailand and Malaysia both reported record daily cases on Thursday.

“The Delta variant has exposed the vulnerability of Asian economies as the overall vaccination rate is low in Asia,” wrote analysts at Bank of America.

This is weighing on shares in Asia and while the MSCI Asian benchmark is up 1.6% this week, it is still down just more than 10% from all time highs hit in February.

In contrast, the MSCI world shares index is just shy of a record high, which it hit on Wednesday.

US unemployment claims

US stock futures, the S&P 500 e-minis, were down 0.05% on Friday after the S&P 500 closed at record levels the day before after a spate of strong corporate earnings and a further decline in US unemployment claims.

Investors hoped for a further shot of confidence from the report on July employment data due at 12.30pm GMT, expected to show robust gains albeit partly due to seasonal technical factors as much as underlying growth.

Treasury yields extended their gains, having earlier been helped by the healthy jobless claims report.

Benchmark 10-year Treasury note yields rose to 1.2432% approaching a week high, compared with its US close of 1.217% on Thursday.

This had a knock-on effect for the dollar, which rose against the yen to a week high.

Oil prices rose on Friday but were still set for their biggest weekly loss since October after falls earlier in the week due to rising Covid-19 cases and a surprise build in US crude stockpiles.

US crude was $69.5 a barrel, up 0.47%. Brent crude was $71.76 per barrel, up 0.66%.

The stronger dollar and potential for higher yields hurt gold. The spot price fell 0.31% to $1,798.6.

Ether, the world’s second largest cryptocurrency dropped 2% a day after a major software upgrade to its underlying ethereum blockchain, which is expected to stabilise transaction fees and reduce supply of the token.

Reuters