Groggy Europe keeps stocks shy of record highs
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[August 13, 2020]
By Marc Jones
LONDON (Reuters) - World stocks' return to
record highs looked set to be delayed for another day on Thursday, as
stalemate in U.S. stimulus talks, trade war angst in both Europe and
China and the COVID-19 pandemic all reined the bulls back.
A leap from Japan's Nikkei in Asia [.T] after Wall Street's S&P 500 had
finished just points off its record high [.N] had bolstered hopes of a
breakthrough, but Europe had other ideas.
The STOXX 600 <.STOXX> was on course to snap a four-day winning streak
after Washington said it would maintain 15% tariffs on planes and 25%
tariffs on other European goods, while tourism giant TUI <TUIT.L> sank
4% as it reported an eye-watering 1.1 billion euro loss. [.EU]
"Although people think things are getting better, there is still so much
uncertainty," said Louise Dudley, a portfolio manager at Federated
Hermes in London.
The global rally has seen MSCI's world index <.MIWD00000PUS> rise 50%
since its March lows to stand just 1.4% off its all-time high. Dudley
said it still had room to run, especially with companies cutting costs
and working-from-home arrangements helping high-flying tech and internet
stocks.
In the currency and bond markets, normal service resumed as a decline in
hopes for a compromise between Republicans and Democrats over additional
stimulus for the U.S. economy pushed the dollar <=USD> down 0.3% against
most of its peers. [/FRX]
A selloff in benchmark government bond markets also eased, as investors
digested the biggest ever 10-year U.S. debt sale and some surprisingly
strong U.S. inflation figures.
Benchmark German 10-year government yields were down 1.2 basis points at
-0.45% <DE10YT=RR>. Consumer prices there, harmonised for comparability
with other European countries, were confirmed down 0.5% in July from the
previous month.
Traders will be watching for the U.S. initial jobless claims later in
the day, with economists polled by Reuters expecting a fall.
"The volatility of yields is just a reality that we have to deal with at
the moment." said Brian Jacobsen, at Wells Fargo Asset Management.
Central banks like the U.S. Federal Reserve are "not going to take the
punch bowl away this time", he said. "In fact, they are going to wait
until the party is very much over until they take it away."
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Passersby wearing protective face masks, following an outbreak of
the coronavirus, are reflected on a screen displaying stock prices
outside a brokerage in Tokyo, Japan March 6, 2020. REUTERS/Issei
Kato
JAPAN JUMP
In Asia, Japanese stocks were the main mover, soaring 1.8% to a
six-month peak <.N225> on gains from chip firms. [.T]
Markets are still eagerly awaiting a breakthrough in wrangling over
the next U.S. stimulus package, though with little sign of progress
the euro <EUR=> poked back above $1.18 and Turkey's troubled lira
<TRY=> was able to grab some respite. [EMRG/FRX]
The Australian dollar <AUD=> nudged ahead too after
better-than-expected jobs figures - though the fact that
unemployment topped a million for the first time ever capped gains.
Australia was also the outlier in regional equity markets, with
selling of communications giant Telstra <TLS.AX> after a profit
plunge dragging on the index <.AXJO>.
Korea's Kospi <.KS11> led gains in other markets outside Japan,
rising 0.7% to a two-year high, while in commodities, oil mostly
clung to solid gains made overnight when a drop in U.S. crude
inventories spurred hopes that fuel demand is recovering. [O/R]
Brent crude futures <LCOc1> were last 0.2% softer at $45.33 a barrel
which was roughly where it was before COVID-19 began to spread out
of Asia, while U.S. crude <CLc1> dipped by the same margin to $42.60
a barrel.
"People are looking at the glass half full, and testing the waters,"
said Bank of Singapore currency analyst Moh Siong Sim.
(Additional reporting by Tom Westbrook in Singapore; Editing by
Kevin Liffey)
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