Delta fears remain despite market rebound

The rise in Covid cases continues to hamper sentiment, with dollar strength and falling treasury yields undermining the gains in stocks. In the UK, reopening stocks and housebuilders lead the gains. 

• Stocks regain ground, yet weak yields and a rising dollar highlight ongoing anxiety 
• Reopening stocks likely to remain at forefront of volatility 
• Housebuilders benefit from easing fears of monetary tightening

US markets have followed their European counterparts higher today, with traders opting to buy the dip in the wake of yesterday’s sharp decline. Fears around the rise of the Delta variant remain evident despite today’s reprieve, with a five-month low for the US 10-year highlighting the lack of full conviction behind this move. We are also seeing that risk-off sentiment exhibited throughout the FX-markets, with GBPUSD hitting a five-month low thanks to rising UK Covid cases and haven dollar demand. Crude prices have stabilised somewhat after a dramatic collapse in energy prices yesterday, with OPEC expected to gradually ramp-up demand in the months ahead.  

The recent UK market volatility has seen reopening stocks swing between outperformers and underperformers as investor sentiment shifts on a daily basis. Despite fears that the Delta variant could undermine travel and consumer activity, today’s gains for the likes of Rolls-Royce, Hammerson, and Cineworld highlight how reopening stocks are likely to be at the forefront of recent volatility. Housebuilders has been one sector in favour today, with the fall in treasury yields highlighting how many perceive this recent rise in Covid cases as lessening the risk of inflation-led monetary tightening.