Stocks sink as coronavirus fears outweigh recovery hopes
Send a link to a friend
[January 18, 2021] By
Ritvik Carvalho
LONDON (Reuters) - Global stock markets
sank on Monday as soaring COVID-19 cases offset investor hopes of a
quick economic recovery, even after data showing that the Chinese
economy rebounded faster-than-expected in the fourth quarter of 2020.
European stocks as measured by the STOXX 600 index traded 0.1% lower as
of 1134 GMT, after failed merger talks between French retailer Carrefour
and Alimentation Couche-Tard. The continent's 50 biggest stocks were
down 0.3% [.EU]
Germany's DAX traded flat, France's CAC 40 index fell 0.1% and Italy's
FTSE MIB index gained 0.1%. Britain's FTSE 100 index fell 0.3%.
In Asia, Chinese blue chips gained 1.1% after the economy was reported
to have grown 6.5% in the fourth quarter, on a year earlier, topping
forecasts of 6.1%.
Industrial production for December also beat estimates, although retail
sales missed expectations.
"The recovery in domestic demand still lacks a solid backing," said
Lauri Hälikkä, fixed income and FX strategist at SEB. "Sporadic virus
outbreaks have intensified downside risks in the near term."
China reported more than 100 new COVID-19 cases for the sixth
consecutive day, with rising infections in the northeast fuelling
concern of another wave when hundreds of millions of people travel for
the Lunar New Year holiday.
Tough new controls in the city of Gongzhuling in Jilin province, which
has a population of about 1 million people, brings the total number of
people under lockdown to more than 29 million.
Hallika said the impact of the latest regional lockdowns and mass
testing is likely to be limited and short-lived.
The pick-up in China was a marked contrast to the United States and
Europe, where the spread of coronavirus has hit consumer spending,
underlined by dismal U.S. retail sales reported on Friday.
Poor U.S. consumer spending data last week helped Treasuries pare some
of their recent steep losses and 10-year yields were trading at 1.097%,
down from last week's top of 1.187%.
The more sober mood in turn boosted the safe-haven U.S. dollar, catching
a bearish market deeply short. Speculators increased their net short
dollar position to the largest since May 2011 in the week ended Jan. 12.
Also evident are doubts about how much of U.S. President-elect Joe
Biden's stimulus package will make it through Congress given Republican
opposition, and the risk of more violence at his inauguration on
Wednesday.
Elsewhere in Asian markets, Japan's Nikkei slipped 1% and away from a
30-year high.
MSCI'S All Country World Index, which tracks stocks across 49 countries,
fell 0.1%, down for a second session after hitting record highs only
last week.
[to top of second column] |
Traders from BGC Partners, a global brokerage company in London's
Canary Wharf financial centre wait for European stock markets to
open early June 24, 2016 after Britain voted to leave the European
Union in the EU BREXIT referendum. REUTERS/Russell Boyce
E-Mini futures for the S&P 500 traded flat, though Wall Street will be closed on
Monday for a holiday.
BUBBLE?
Investors have discussed the question of whether markets are in or may be headed
for a bubble.
In a monthly letter to clients last week, Mark Haefele, chief investment officer
at UBS Global Wealth Management, said all of the preconditions for a bubble are
in place.
"Financing costs are at record lows, new participants are being drawn into
markets, and the combination of high accumulated savings and low prospective
returns on traditional assets create both the means and the desire to engage in
speculative activity," he said, warning that in the months ahead, investors will
need to pay particular attention to "risks of a monetary policy reversal, rising
equity valuations, and the rate of the post-pandemic recovery."
Haefele said however that while he sees pockets of speculation, the broader
equity market is not in a bubble.
Cryptocurrency Bitcoin traded up 1.2%, fetching $36,236.
The dollar index firmed to 90.908, its strongest since Dec. 21,, and away from
its recent 2-1/2 year trough at 89.206.
The euro had retreated to $1.2070, to its lowest since Dec. 2, while the dollar
gained 0.1% against the yen at 103.78 and well above the recent low at 102.57.
The Canadian dollar eased to $1.2792 per dollar after Reuters reported Biden
planned to revoke the permit for the Keystone XL oil pipeline.
Biden's pick for Treasury Secretary, Janet Yellen, is expected to rule out
seeking a weaker dollar when testifying on Tuesday, the Wall Street Journal
reported.
Gold prices gained 0.4% to $1,833 an ounce, compared to its January top of
$1,959.
Crude oil prices ran into profit-taking on worries the spread of increasingly
tight lockdowns globally would hurt demand, a fall that also dragged the Russian
rouble lower by 1.1%.
Brent crude futures were down 0.1% at $55.60 a barrel, while U.S. crude gained
0.1% to $52.43.
(Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney;
Editing by Angus MacSwan and Hugh Lawson)
[© 2021 Thomson Reuters. All rights
reserved.] Copyright 2021 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |