Record levels of new Covid-19 infections in parts of Europe and the US rattled markets overnight. Stocks slumped and bonds rose as investors re-calibrated growth expectations as new containment measures become increasingly likely. Oil and copper fell, despite the possibility that planning at China’s plenum this week may bring support for key commodities.

There are also concerns around the inability of the US to enact a fresh fiscal stimulus package. Record levels of central bank liquidity and already high government support packages may see investors wondering about the ability of authorities to respond to a second major economic hit.

The challenge for markets is that in most cases they are already pricing a very strong economic bounce. The new outbreaks, and the potential for a double-dip recession, directly contradict this assumption.

Asia Pacific markets are under pressure, with futures markets indicating opening falls for stocks. Trade data released this morning in New Zealand is broadly in line with forecasts, although the trade balance for the year was better than expected. China industrial profits and Hong Kong trade numbers could also shape trading today.


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