Risk appetite disappears as Wall Street passes peak everything, Treasuries soar on global growth concerns, OPEC+ weekend deal, low yields attract some bullion buyers, bitcoin tumbles

Covid jitters weighing on equity markets

Risk aversion is firmly in place as the Delta Covid variant spread is triggering a flight to safety as global economic concerns intensify.  Global investors are growing anxious and selling stocks, commodities, and even cryptocurrencies to buy US Treasuries.  With coronavirus surging across both advanced and developing nations, the bond market is delivering a one-way trade, lower global bond yields.  Equities were ripe for a pullback given Wall Street was in agreement that this is ‘as good as it gets’ for peak earnings, economic growth, monetary stimulus, and shortly fiscal support.  It is hard to hold risky assets over the short term now that we have past-peak everything.

US stocks pushed even lower after reports that the US and allies are blaming individuals tied to the Chinese government over the Microsoft Exchange hack. The laundry list of issues between the world’s two largest economies continues to grow and likely suggests we won’t see calm waters anytime soon. US-China tensions saw telecom and cybersecurity issues jumped ahead of both trade tariffs and living up to the phase-one trade deal.  Human rights issues, China’s tech crackdown, and handling of Hong Kong are also contributing to US-China tensions.  Panic selling of risky assets could happen if a back-and-forth of harsh tones becomes a recurring theme between the US and China.

Bitcoin
Bitcoin tumbled as Wall Street grows nervous, as the Delta variant impact to global growth for the rest of the year could lead to a massive stock market correction.  Bitcoin is the ultimate risky asset right now and it could see intense selling pressure if Wall Street enters into panic selling mode.

Bitcoin’s fundamentals still remain intact for much higher prices later this year, but the short-term outlook looks dicey.  If bitcoin falls below the USD 30,000 level, momentum selling could look for an easy test of the USD 28,900 level.  That could be the line in the sand for defending a deeper plunge toward the USD 25,000 which at that point would lead to many sellers eyeing the psychological USD 30,000 level.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya