Global shares sink as COVID-19 cases spike
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[June 28, 2021] By
Ritvik Carvalho
LONDON (Reuters) - Global shares began the
week with a cautious start on Monday as Asian and European markets fell
after a spike in coronavirus cases across Asia over the weekend hurt
investor sentiment while oil hovered around 2-1/2 year highs.
MSCI's All Country World Index, which tracks shares across 49 countries,
was down 0.1% by midday trade in London. U.S. stock futures traded
positive, indicating gains at the open on Wall Street later in the day.
Graphic: Global asset performance http://tmsnrt.rs/2yaDPgn
Graphic: World FX rates http://tmsnrt.rs/2egbfVh
Stock markets across the world rebounded last week and were in touching
distance of record highs as concern ebbed about future monetary
tightening from the U.S. Federal Reserve. On Monday however, growing
concern about the spread of the Delta variant of the COVID-19 virus took
some shine off equities.
European stocks, as measured by the pan-European STOXX 600 index were
down 0.3% by 1105 GMT, although they were not far off record highs.
Germany's DAX was down 0.1%, while France's CAC 40 and Britain's FTSE
100 index dipped 0.5%. [.EU] Travel and leisure stocks took a particular
hit, with the region's sectoral index falling to a one-month low.
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"In Europe, the rapid spread of the highly contagious Delta variant is
looming over the start of the tourist period," said Sophie Griffiths,
market analyst at OANDA, noting that European leaders have agreed to
step up coordination of travel restrictions following a warning from
German Chancellor Angela Merkel.
"While no changes in rules were agreed, the statement could pave the way
for more countries to follow Germany’s lead and prevent UK tourists from
travelling to Europe this summer. This would be a severe blow to
airlines and travel and tourism stocks, which are trading sharply lower
today."
Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside
Japan was last a shade weaker at 702.57. Australian shares slipped 0.2%.
Japan's Nikkei and South Korea's benchmark KOSPI were barely changed.
Investors were concerned about a spike in coronavirus infections in Asia
with Sydney plunging into a lockdown after a cluster of cases involving
the highly contagious Delta strain ballooned.
Indonesia is battling record high cases while a lockdown in Malaysia is
set to be extended. Thailand too announced new restrictions in Bangkok
and other provinces.
Chinese shares were a touch higher with the CSI300 index up 0.2%. Data
over the weekend showed profit growth at China's industrial firms slowed
again in May as surging raw material prices squeezed margins and weighed
on factory activity.
Investors will keep a close eye on official factory activity from China
due Wednesday. The manufacturing reading is expected to slow to 50.7
from 51. The private sector Caixin Manufacturing PMI will follow later
in the week.
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The London Stock
Exchange Group offices are seen in the City of London, Britain,
December 29, 2017. REUTERS/Toby Melville
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Weaker-than-expected U.S. inflation and news of a bipartisan U.S. infrastructure
agreement boosted risk appetite last week.
The infrastructure plan is valued at $1.2 trillion over eight years, of which
$579 billion is new spending.
"Investors are keenly watching the progress of U.S. President Biden's bipartisan
infrastructure deal through Congress. The package could boost demand
significantly, driven by investment in renewables and electric vehicle (EV)
infrastructure," ANZ analysts wrote in a note.
Oil prices hit and then recoiled from highs last seen in October 2018 in early
European trade on Monday as investors eyed the outcome of this week's OPEC+
meeting and as the United States and Iran wrangle over the revival of a nuclear
deal, delaying a return of Iranian oil exports.
Brent futures fell 0.2% to $76.01 a barrel, while U.S. crude fell 0.1% to
$73.97.
The S&P 500 rose 2.7% last week, its strongest weekly gain since early February
after data showed a measure of underlying inflation for May rose less than
expected, easing fears of a sudden tapering in stimulus by the Federal Reserve.
The Dow climbed 0.7% while the tech-heavy Nasdaq slipped 0.06% after holding
near the previous session's record high.
Later in the week, a closely watched U.S. jobs report will be released for June
which could point to strong labour demand.
Yields for benchmark 10-year U.S. Treasuries jumped back above 1.50% to close
out a week in which rates notched their largest gains since March.
Monetary and fiscal stimulus around the world in response to the pandemic is
boosting financial assets, despite an uneven recovery between regions.
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Boston Federal Reserve Bank President Eric Rosengren on Friday warned a build-up
of financial stability risks linked to a low interest rate environment could
lead to another downturn that interrupts the labour market recovery and impedes
a return to maximum employment.
The U.S. dollar was slightly firmer at 91.808 against a basket of other
currencies.
The Japanese yen weakened to 110.65 versus the greenback and the euro eased to
$1.1925.
An appreciating dollar took some lustre off gold with prices down 0.2% at
$1,776.7 an ounce.
(Reporting by Ritvik Carvalho; additional reporting by Swati Pandey in
Singapore; editing by Jason Neely and Chizu Nomiyama)
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