Market pricing in spread of Delta variant, slowing marginal growth: Jim O’Neill

MUMBAI: Global financial markets are likely pricing in the growing spread of the Delta variant of Covid-19 across the world and signs of slowdown in the Chinese economy, renowned British economist Jim O’Neill told Bloomberg TV.

“More and more people have become more optimistic about the recovery and markets have priced it in. But if now it is the case that the marginal rate of economic recovery is going to weaken, then the market will readjust,” O’Neil said.

Global financial markets have seen a risk-off move in Thursday’s session owing to rising concerns over the spread of the Delta variant of Covid-19, originally found in India, and concerns over economic slowdown in China.

On Wednesday, media reports in China said the country’s Cabinet supported a possible cut in lending rates to boost economic activity and support small businesses. The prospect of rate cuts after two consecutive months of slowdown in economic activity in China has made investors anxious about the growth outlook for the world’s second largest economy.

“If it turns out that this Delta spread is powerful and the vaccines are unable to cut the spread, then it is going to have a negative impact on people's behaviour,” O’Neill said.

He said he was surprised by the mood of the US Federal Reserve as the minutes of the latest monetary policy meeting showed that the central bank could soon lay out a roadmap for tapering its record bond buying program.