Warning signs for global recovery as Delta dims outlook

Warning signs for global recovery as Delta dims outlook

LONDON- A drubbing in world equity markets this week and a huge flight to safety into U.S. Treasuries this week suggests investors now doubt that a much-anticipated return to post-COVID normality is feasible any time soon. Data from the United States and China, which account for more than half of world growth, suggests a slowdown in the recent blistering pace of the global economy alongside rising prices for all manner of goods and raw materials. Coinciding with a resurgence in the Delta variant of COVID-19, markets may be sending alarm signals about the global economic outlook, chief FX strategist George Saravelos told clients. "As prices have risen, the consumer has been cutting back demand rather than bringing forward consumption. This is the opposite of what one would expect if the environment was genuinely inflationary and it shows the global economy has a very low speed limit," Saravelos wrote. That sentiment was evident in the latest flow data too. Bank of America Merill Lynch flagged "stagflation" concerns for the second half of 2021, noting slowing inflows into stocks and outflows from high-yield assets. 1/ DOLLAR REFUGE Data on hedge funds' weekly currency positioning is the closest available real-time indicator of investors'