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A COVID-19 patient attended by a health worker inside a vehicle at a dedicated COVID-19 government hospital in Ahmedabad, India on April 22.Ajit Solanki/The Associated Press

COVID-19 was meant to be in retreat by now but in many countries – India, Japan, Thailand – it has staged a comeback.

India in particular was seen as this year’s growth leader with a 10-per-cent-plus rebound. Those hopes have been sunk by a second wave of the pandemic that has seen daily infections rise to the highest recorded anywhere. The central bank highlighted risks to the economy, with officials noting that “monetary and fiscal policies have already used most of their space.”

The rupee is down 2.7 per cent against the U.S. dollar in April, a month when the greenback itself was weak, Indian stocks have logged a third week of losses and bad loan fears are mounting.

The impact will be felt globally, from commodities to consumer goods. Given India is the world’s third-largest oil user, crude prices are under pressure. Worryingly, the longer the crisis lasts, the greater the chances that new vaccine-resistant virus mutations will emerge.


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Traders look on as a screen shows Federal Reserve Chairman Jerome Powell's news conference after the U.S. Federal Reserve interest rates announcement on the floor of the New York Stock Exchange (NYSE) on July 31, 2019.BRENDAN MCDERMID/Reuters

The Federal Reserve’s policy meeting ending April 28 may help markets glean how it might respond to U.S. economic recovery and higher inflation after consumer prices rose by the most in more than 8½ years in March.

Fed chairman Jerome Powell sees inflation “a little higher” this year but remains committed to limiting any overshoot, according to a letter sent to Senator Rick Scott.

Ten-year yields have stabilized and the inflation rebound to 2.6 per cent, well above target, is likely to be short-lived. Still, swaps show that market expectations of future inflation are rising and that means Treasury volatility may not be over yet.


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Facebook, Amazon, Netflix and Google logos are seen in this combination photo.REUTERS FILE PHOTO/Reuters

Around 86 per cent of U.S. firms have beaten earnings expectations so far and forecasts overall are for 33 per cent Q1 growth. In coming days, Facebook Inc., Apple Inc., Google-parent Alphabet Inc. and Inc. will show how the tech heavyweights are faring.

Apple earnings are seen up about 32 per cent. Tesla Inc. meanwhile reports on Tuesday and its revenues are forecast to have grown by 71 per cent, Refinitiv I/B/E/S data shows.

Their performance may be key to how stocks do – while near record highs, U.S. equities face a thicket of obstacles, from the expected peak in U.S. economic growth to White House plans to nearly double taxes on capital gains for the wealthy.


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Greens Party co-chair Annalena Baerbock gives an interview on April 19 in Berlin.Pool/Getty Images

It’s rare for markets to get excited about German politics. But as chances rise of the Greens becoming a key member of the next government, investors are waking up to election risk in Europe’s largest economy.

Annalena Baerbock will be the first Green candidate for chancellor in the 40-year history of the party, which has overtaken the conservative bloc in one poll.

In-fighting and a face mask procurement scandal have hurt the ruling CDU/CSU alliance. The choice of centrist Armin Laschet as their candidate to succeed Angela Merkel as chancellor, over the more popular Bavarian Markus Soeder, may hurt its chances in September’s election.

A future government comprising the Greens could see increased spending on climate friendly projects and a push for deeper European integration. It explains why German Bund yields are near seven-week highs. Cautious centrist Mr. Laschet is German conservatives’ candidate to succeed Ms. Merkel.


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A security guard walks past in front of the Bank of Japan headquarters in Tokyo on Jan. 23, 2019.Issei Kato/Reuters

Japan’s flows data on Thursday is a hot item for markets.

February’s spike in U.S. Treasury yields was, after all, at least partly attributed to Japanese buyers’ absence from the market.

Japan’s largest life insurance firms have been reluctant to add to Treasury holdings – fearing higher U.S. inflation will trigger a repeat of the first quarter’s brutal bond selloff and currency volatility. Some plan to sell foreign bonds and buy yen securities.

Japanese investors bought a net 906 billion yen (US$8.39-billion) of foreign bonds last week, down 47 per cent from the previous week. A further slowdown in net purchases, not to mention a swing to net selling, has consequences for Treasuries.

At home, too, the Bank of Japan may not welcome insurers’ plans if flows strengthen the yen. The BOJ’s April 26-27 meeting is expected to deliver a downbeat forecast for inflation.

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