Daily Brief: Just When You Thought You Were Out, Covid Pulls You Back In

Daily Brief: Just When You Thought You Were Out, Covid Pulls You Back In

about 2 years ago3 mins

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Just when you thought you were out, the pandemic pulls you back in: news of a fresh coronavirus strain prompted a market selloff on Friday.

What does this mean?

You can never quite relax in these pandemic-stricken times: surging Covid cases are a constant threat to the world’s already-slowing recovery, and the arrival of a brand new variant has sparked worries that economies might take another hit soon. The variant’s suspected to have caused a surge of South African cases last week, and global health officials reckon it could both spread faster than Delta and better evade our vaccines. That means it has the potential to send countries back into the depths of lockdowns, which would cripple economies around the world. At least governments are acting fast: plenty of countries have already reimposed travel restrictions to try to limit the spread.

Stocks fall

Why should I care?

For markets: Stocks get grounded.

Stock market indexes around the world plummeted on Friday, as concerned investors started selling off stocks and buying so-called “safe haven” assets – like gold and government bonds – instead. The prospect of travel restrictions hit airline stocks particularly hard: British Airways’ parent IAG initially saw its stock fall by 21%. There is at least one company that could benefit if restrictions come back into force, mind you, which might be why Zoom’s stock rose 9%.

Zoom stock
Source: The Wall Street Journal

Zooming out: Don’t believe the hype.

Take those investor reactions with a pinch of salt: professional investors are taking a break for the holidays, which means there’s been a lot less trading activity than usual. The trades that are being made, then, could be having a much bigger impact on the wider markets than they would do normally. Plus, it was a Friday: investors and traders might just be keen to get rid of their risky assets before the weekend, in case more bad news comes out when markets are shut and they can’t do anything about it.

Keep reading for our next story...

Pinduoduo's Earnings Left Something To Be Desired

Pinduoduo image

Pinduoduo’s salad days might finally be over: the Chinese fruit and veg ecommerce platform reported worse-than-expected results on Friday.

What does this mean?

Pinduoduo was full of beans when China was in a pandemic-related pickle, but its performance went a little pear-shaped last quarter. The country’s shoppers could, after all, finally go bananas in bricks and mortar stores, thanks to both a rise in coronavirus vaccinations and drop-off in restrictions. Toss in supply disruptions that might’ve made it tricky for Pinduoduo to cherry-pick the stock it needed, and the last few months didn’t exactly bear fruit: the platform’s revenue grew 51% compared to the same time last year – a long way short of the 87% investors were expecting.

Earnings
Soure: Pinduoduo

Why should I care?

For markets: Is Pinduoduo going cheap?

Pinduoduo’s share price initially fell 12%, but the update itself wasn’t entirely to blame for the sour grapes: investors have been increasingly wary of China’s unpredictable crackdowns on tech companies, with Pinduoduo’s stock having fallen more than 40% this year even before these results. But at least the tech giants are peas in a pod: Alibaba and Tencent have seen their stocks collapse 43% and 20% respectively in the same period. Some analysts reckon this makes now a plum time to buy Chinese stocks, but only time will tell if they’re just dangling a carrot in front of investors’ noses…

The bigger picture: A tale of two countries.

Then again, Pinduoduo is small potatoes as far as China’s concerned: the only thing it gives a fig about right now is reversing the slowdown in its economic growth. That’s got some economists wondering if the country might start slashing interest rates, which would lower the cost of borrowing and, in turn, encourage companies and individuals alike to spend their money. How do you like them apples, America: the US Federal Reserve has been talking about raising rates in an effort to curb rocketing prices.

Cuts coming
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