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Global stocks are still plumbing the lows after renewed virus concerns spooked markets overnight. Small caps suffered a second consecutive day of underperformance, with traditional defensive, Utilities and REITs closing 1% higher. Most reopening baskets closed 3% lower each, as travel advisory and disappointing United Airlines earnings weighed on equities.

In more positive news, Johnson & Johnson said it would restart vaccine deliveries in the EU after the European Medicines Agency said the benefits of the shot outweigh the risks of a possible link with cases in blood clots. On the earnings front, Netflix missed expectations, weighing heavily on the stock, down as much as 11% in after-hours. The US dollar rose for the first time in 7 sessions, and the 10y US Treasury yield dropped to its lowest level in over five weeks and proved to be a good combination for gold.

A worsening health crisis in India pushes out the return of pre-covid travel even further in the APAC region. It highlights the uneven pace of economic recovery in pockets of EM. Sticky travel restrictions leave economies with greater dependence on tourism (e.g. Thailand) and domestic demand (e.g. India) at risk of further disappointing growth expectations in 2021. Which is severely clouding the oil markets viewfinder and pushing bak on Jet fuel recovery

There is little let-up in covid-variant concerns in EM, with India now in sharp focus. The long positioning in Indian equities is stretched judging by record inflows over the past year, suggesting that it is too early to fade the rally in USDINR. More broadly, variants are delaying the recovery in pockets of EM and driving the outperformance of DM equities over EM, +9.0pp since Feb. 17. Meanwhile, the export-driven North Asian economies have more to gain on a relative basis and are all chalking up solid recoveries in shipments.

The more export-driven North Asian economies have more to gain on a relative basis, which China and Korea chalking solid recoveries in exports

Published by Stephen Innes, Chief Global Markets Strategist at Axi