ASX200 traders cautious as Delta spreads and ahead of EOFY

After fending off the original coronavirus, Australia has entered a “new phase” of the pandemic. A nationwide outbreak of the highly contagious Delta variant first detected in India that has prompted lockdowns in Greater Sydney and Darwin.

Australia

Why is the spread of the Delta Variant causing concern?

While there is insufficient data to determine if the Delta strain is more deadly than earlier strains, the Delta variant is almost twice as likely to cause hospitalization for the infected.

As NSW’s contract tracers are finding, the Delta variant spreads easily and quickly due to mutations that make it better at latching onto cells within bodies.

Prompting further concern, Australia’s vaccine rollout has been very slow compared to other countries. Just 4% of Australians have been fully vaccinated compared to 60% in the UK.

For the 25% of Australians who have received their first vaccine dose, the efficacy rate for Pfizer-BioNTech and AstraZeneca is 30% and 18% respectively. For the 4% of Australians who are fully vaccinated, it rises to 79% for Pfizer and 60% for AstraZeneca.

Impact of lockdowns on the economy and RBA Policy

The outbreak of the Delta variant comes just three months after the end of key financial support programs such as JobKeeper. The state of NSW accounts for around one-third of Australian economic activity and Great Sydney which is at the epicentre of the outbreak, accounts for three-quarters of that.

Supported by evidence from previous short sharp lockdowns that suggests the impact on confidence and activity is relatively short-lived, US investment bank Morgan Stanley estimate the direct economic impact of a two-week lockdown will cost approximately ~A$2bn or 0.1% of annual GDP.

However, if the Greater Sydney lockdown appears set to be extended and other States also go into lockdown, the outbreak has the potential to play a part in the Board's thinking at next week’s live RBA meeting.

What does it mean for the ASX200?

Apart from the outbreak, traders also have end-of-financial-year flows to contend with that often brings with it volatility as fund managers rebalance portfolios.

In light of all of this, the ASX200 has been strangely subdued today currently trading flat on the day at 7306.4, seemingly unsure which way to turn. Technically, the preference is to buy weakness caused by uncertainty towards uptrend support coming in 7100/7000 area.

ASX200 traders cautious as Delta spreads and ahead of EOFY

Source Tradingview. The figures stated areas of the 28th of June 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

More from ASX

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.