GLOBAL MARKETS – Stocks fall as coronavirus fears outweigh recovery hopes

* Chart: overall performance of assets tmsnrt.rs/2yaDPgn

* Chart: global exchange rates tmsnrt.rs/2egbfVh

* MSCI ACWI down 0.1%

* Dollar rising, yen rising, euro falling

* American markets on vacation

LONDON, Jan. 18 (Reuters) – Global stock markets sank on Monday as the surge in COVID-19 cases dashed investors’ hopes for a rapid economic recovery, even after data showing the Chinese economy has rebounded faster than expected in the fourth quarter of 2020.

European stocks as measured by the STOXX 600 index traded down 0.1% at 11:34 a.m. GMT, after merger talks between French retailer Carrefour and Alimentation Couche-Tard failed. The continent’s 50 biggest stocks fell 0.3%

The German DAX was stable, the French CAC 40 index fell 0.1% and the Italian FTSE MIB index gained 0.1%. Britain’s FTSE 100 index fell 0.3%.

In Asia, Chinese blue chips rose 1.1% after the economy grew 6.5% in the fourth quarter, compared to a year earlier, beating expectations by 6.1%.

Industrial production in December also beat estimates, although retail sales fell short of expectations.

“The recovery in domestic demand is still lacking solid support,” said Lauri Hälikkä, fixed income and FX strategist at SEB. “Sporadic virus outbreaks have heightened the downside risks in the short term.”

China has reported more than 100 new cases of COVID-19 for the sixth day in a row, with rising infections in the northeast fueling concern for another wave as hundreds of millions of people travel for the holidays of the Lunar New Year.

Tough new checks in Gongzhuling City, Jilin Province, which has a population of around 1 million, bring 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 recovery in China was in stark contrast to the United States and Europe, where the spread of the coronavirus has hit consumer spending, underlined by dismal US retail sales reported on Friday.

Poor US consumer spending data last week helped Treasuries cut some of their recent large losses and 10-year yields were trading at 1.097%, down from a high of 1.187 % of last week.

The more subdued mood in turn boosted the safe haven US dollar, catching up with a deeply short bear market. Speculators increased their net short dollar position to the highest since May 2011 during the week ended January 12.

It’s also clear that US President-elect Joe Biden’s stimulus package will reach Congress given Republican opposition and the risk of more violence when he takes office on Wednesday.

Elsewhere in Asian markets, the Japanese Nikkei slipped 1% and moved away from a 30-year high.

The MSCI All Country World Index, which tracks shares of 49 countries, fell 0.1%, down for a second session after hitting record highs last week.

E-Mini futures for the S&P 500 traded flat, although Wall Street was closed on Monday for a vacation.

BUBBLE?

Investors have debated whether the markets are or could be heading for a bubble.

In a monthly letter to clients last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, said all the preconditions for a bubble were in place.

“Funding costs are at record highs, new entrants are drawn into the markets, and the combination of high accumulated savings and low potential returns on traditional assets creates both the means and the desire to engage. in speculative activity, ”he said, warning that in the coming months investors will need to pay close attention to“ the risks of monetary policy reversals, rising equity valuations and the pace of post-pandemic recovery ”.

Haefele said, however, that while he saw pockets of speculation, the broader stock market was not in a bubble.

Bitcoin cryptocurrency traded up 1.2%, amounting to $ 36,236.

The dollar index strengthened to 90.908, its strongest since Dec. 21, and away from its recent 2 1/2 year low at 89.206.

The euro had fallen to $ 1.2070, its lowest since Dec. 2, while the dollar gained 0.1% against the yen at 103.78 and well above the recent low of 102.57.

The Canadian dollar fell back to $ 1.2792 on the dollar after Reuters announced that Biden planned to revoke the license for the Keystone XL pipeline.

Biden’s choice for Treasury Secretary Janet Yellen should rule out a search for a weaker dollar during his testimony on Tuesday, the Wall Street Journal reported.

The price of gold rose 0.4% to $ 1,833 an ounce from its January high of $ 1,959.

Crude oil prices have collided with profit taking over fears that the spread of increasingly tight restrictions globally could hurt demand, a drop that also pushed the Russian ruble down 1.1 %.

Brent futures were down 0.1% to $ 55.60 a barrel, while US crude rose 0.1% to $ 52.43.