Stocks stagnate, bond yields slide as caution replaces vaccine euphoria

LONDON (Reuters) – Global stocks stagnated on Friday as spike in COVID-19 hospitalizations in the US and Europe dampened euphoria over a promising vaccine, although Wall Street appeared poised for a firmer opening According to the news, President-elect Joe Biden was set to consolidate his electoral victory.

US futures rose 0.5% to 0.830 GMT .EScv1 after Edison Research projected Biden to capture the state of the Arizona battlefield, further weakening President Donald Trump’s efforts to overturn the November 3 election results.

However, the pan-European Stoxx 50 .STXEc1 was down 0.2%, just above its opening levels. MSCI All Country Stock Index .MIWD00000PUS slipped 0.1%

“You got the news overnight in the United States about COVID, which is not so good and which … gives investors the opportunity to make profits after the Pfizer and post-American elections,” said François Savary, investment director at Swiss asset manager Prime Partners.

On Thursday, Wall Street finished lower on news of the rise in coronavirus infections and as investors weighed the timing of an effective vaccine rollout. Several US states have introduced stricter social distancing rules following reports of record hospitalizations

In Europe too, the number of hospitalizations is now higher than at the peak of the first wave and officials have said infection control measures must continue. [nL1N2HY2AY]

U.S. Federal Reserve Chairman Jerome Powell said on Thursday that progress in developing a coronavirus vaccine was good news, but short-term economic risks remain, underscoring the likely need for a stimulus additional government.

Global equities, however, are up 1.3% for the week. They reached record levels on Monday when pharmaceutical giant Pfizer announced that its vaccine had been effective in 90% of cases. Russia went on to report that its vaccine trial has shown promise as well.

European markets lost 0.1% to 0.7%, but the pan-regional STOXX index is set for a second week of big gains. It has risen 5% so far this week as vaccine news prompts more investors to buy shares in banks and travel agencies.

Previously, Chinese blue chips .CSI300 lost 1% after the Trump administration said it would ban U.S. investments in companies linked to the Chinese military. A spate of high-profile bond defaults by state-owned companies also weighed in.

Nikkei 225 from Japan .N225 fell 0.57%.

Some investors saw the pullback as a buying opportunity.

“In my opinion, it is darkness just before dawn,” said Michael Frazis, portfolio manager at Frazis Capital Partners in Sydney.

“You have the second wave of coronavirus, new rounds of closures, clear issues around the world, trips leaving … But at the same time, we have the strongest evidence that we have a vaccine.”

(Graphic: S&P 500 sectors gain amid vaccination hopes 🙂

STIMULUS

One of the sticking points in the markets has been the inability of US lawmakers to agree on an adequate spending program. The need for this stimulus was underscored by Thursday’s data showing a slower pace of employment recovery and low inflation.

While Democrats in Congress have urged negotiations on a multibillion-dollar stimulus package, leading Republicans have dismissed it as too expensive.

U.S. Treasuries yields slipped further, with 10-year yields falling about a basis point to 0.87%, well below the seven-and-a-half-month high of 0.98% reached on Monday US10YT = RR.

The yield curve, an indicator of growth and inflation expectations, has also flattened.

“This (the rebound in bond yields) received an additional boost from weaker-than-expected US inflation data for October which was released yesterday, which is in line with weaker economic reality,” analysts said. ‘ING Bank.

Germany’s 10-year yield slipped 1.5bp to -0.54%, beating this week’s two-month highs DE10YT = RR.

(Chart: Yields on longer-term Treasury debt 🙂

Oil prices remained on track for a second week of gains, but the surge in COVID-19 and rising crude inventories in the United States pushed Brent futures down 1% LCOc1 at $ 43 a barrel [O/R]