'Stock and Cryptocurrency Plunge Amid Delayed Economic Recovery and Delta Concerns'

US and German Government Bond Yields Fall Consecutively
New York Stock Market Turns Downward
Cryptocurrencies Also Decline Simultaneously

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Concerns over the spread of the Delta variant and analyses suggesting that the U.S. economy may have peaked in the second quarter are putting pressure on global financial markets.

Following a decline in the service sector and a rise in unemployment rates, the number of new unemployment claims has turned upward. While U.S. Treasury yields, considered safe assets, have plunged sharply, stock markets and cryptocurrencies have failed to avoid declines.

On the 8th (local time), the U.S. Department of Labor announced that last week's new unemployment claims totaled 373,000. This exceeded the previous week's figure by 2,000 and surpassed the market expectation of 350,000. The previous week's new claims were also revised upward from 364,000 to 371,000. New unemployment claims have turned upward for the first time in three weeks.

The June unemployment rate, announced last week, rose to 5.9%, contrary to expectations, and with weekly new unemployment claims also increasing, concerns about the labor market recovery are spreading again.

CNBC broadcast described it as an "unexpected increase," warning that the smooth employment growth seen in the first half of the year may face "hidden obstacles" going forward.

Edward Park, Chief Investment Officer at Brooks McDonald, stated, "There is a growing perception that the situation in mid-June, which seemed like a Goldilocks scenario, was not positive," adding, "Delta or other Delta variants will highlight market risks."

Concerns over delayed economic recovery and the resurgence of COVID-19 were immediately reflected in the U.S. financial markets.

On that day, U.S. Treasury yields fell intraday to 1.25%. A decline in Treasury yields means a rise in bond prices. As worries about delayed economic recovery have triggered a preference for safe assets, U.S. Treasury yields have been falling continuously in recent days. In March, Treasury yields rose to 1.78% amid concerns that the economy was recovering rapidly and inflation was surging.

The strength in government bonds is not limited to the U.S. German government bonds also fell to -0.321%, the lowest since the end of March.

As risk-averse behavior emerged, major indices on the New York Stock Exchange all turned downward. Despite technology stocks showing strength due to falling Treasury yields and setting record highs the previous day, the S&P 500 and Nasdaq indices each plunged by 1.3%. The Dow Jones Industrial Average also fell by 1.3%.

The global COVID-19 death toll surpassed 40 million the day before, and the announcement of the Tokyo Olympics being held without spectators is also interpreted as having negatively affected investor sentiment.

Travel-related stocks such as Delta, American Airlines, Boeing, Carnival, and Royal Caribbean all plunged. Retailers Macy's and Kohl's also fell by 3% each.

Semiconductor companies' stock prices also failed to avoid weakness. Micron, Nvidia, Qualcomm, and Intel all declined by over 2%.

Apple, which had reached an all-time high the previous day, also turned downward with a 1.8% decline.

Due to the drop in Treasury yields, bank stocks such as JPMorgan, Goldman Sachs, and Bank of America are also falling simultaneously.

Christopher Harvey, Wells Fargo's equity investment strategist, predicted, "If Treasury yields fall below 1.25%, the stock market could undergo a correction of more than 5%."

CNBC broadcast expressed concern that although the U.S. has bought time through vaccinations, the spread of the Delta variant in Australia, Asia, and Africa suggests a similar situation could occur in the U.S. this fall.

Lawrence Gostin, Director of the WHO Center for Global Health Law, predicted, "A major COVID-19 outbreak could occur in U.S. states with low vaccination rates." In these areas, relaxed mask-wearing policies may be reimposed.

As of the 4th, 67% of U.S. adults have been vaccinated, but the goal of 70% vaccination has not been achieved.

Cryptocurrencies also fell across the board. Analysts attribute this to risk-asset selling pressure dragging down cryptocurrency prices. Bitcoin is down 5.7% at $32,573. Ethereum and Dogecoin have seen declines of up to 9%.

Due to the decline in Treasury yields, the dollar index fell 0.36% to 92.3. Meanwhile, the Japanese yen and Swiss franc showed strength, rising by over 1% each.

This content was produced with the assistance of AI translation services.