European stocks decline after vaccines ease economic pain from COVID

LONDON (Reuters) – European stocks opened lower on Thursday after gains boosted by advances in vaccines to fight COVID-19, but data across Europe has highlighted the economic damage still being caused by the pandemic.

The markets were watching Britain’s negotiations with the European Union on a trade deal, less than a month before the UK’s full departure from the EU.

Global stocks hit record highs, pushing the dollar lower, with investor appetite for riskier assets whetted by news Britain would start rolling out a COVID-19 vaccine next week, raising the outlook economic recovery.

The dollar index slipped to a two and a half year low of 90.948 on Thursday and was last at 90.968. The gauge of MSCI actions across the world has hit another record high.

“The UK stole a march from the rest of Europe and we had a little bit of well-being yesterday. I am much more optimistic about the stock markets than a month ago, ”said Michael Hewson, chief market analyst at CMC Markets.

The STOXX index of European companies remained stable, led by a 0.2% drop in the Frankfurt and Paris blue chips. The FTSE 100 hit June highs.

Investors are hoping that a new round of weak economic data in Europe and the United States will eventually convince policymakers to accept the stimulus packages that have so far eluded them.

There is still no agreement in the US Congress on a $ 908 billion increase in the world’s largest economy, and the EU has yet to define an economic package agreed in principle while the economy of the euro zone is struggling.

Spain’s November IHS Markit Purchasing Managers (PMI) index fell to 39.5 – below the 50 level separating growth from contraction. Italian services contracted for a fourth consecutive month, with the IHS Markit activity index for services falling to 39.4.

Hewson of CMC said those numbers were “abysmal” and are expected to stay below 45 through January.

A Reuters poll predicts the eurozone economy to shrink again this quarter as new foreclosure measures stifle activity, with the economy taking two years to return to pre-crisis levels.

Eurozone government bonds held up on Thursday with Germany’s 10-year Bund yield down about 1 basis point to -0.53%.

BREXIT END GAME

UK Education Minister Gavin Williamson said satisfactory progress was being made in negotiations with the European Union on a trade deal as the Brexit deadline approached. Irish Foreign Minister Simon Coveney said he believed there was a good chance of reaching a deal within days.

The British pound held on to $ 1.34 on the overall weakness of the dollar, but derivatives markets flashed red over doubts Britain could reach a Brexit trade deal with the EU ahead of exit of the UK Single Market on December 31.

Asian stocks were mixed on Thursday after a choppy day of trading on Wall Street, thanks in part to a disappointing US jobs report.

The U.S. Food and Drug Administration is holding its advisory committee meeting next week, while New York Gov. Andrew Cuomo has said the state’s first vaccine delivery, sufficient for 170,000 residents, was scheduled for December 15.

Hopes that the pandemic would finally be brought under control sparked a resumption of risk in currency markets with the rise of the Australian and New Zealand dollars.

“Currency investors are taking more risk after the latest vaccine breakthroughs, depending on the options,” Morgan Stanley said in a note.

E-Mini futures for S & P500 were stable.

In Asia, Japan’s Nikkei was unchanged while South Korea’s KOSPI and Australia’s benchmark were around 0.4% higher each. Chinese stocks opened lower, with the blue chip CSI300 index 0.2%. New Zealand’s shares were also lower.

Overnight, Wall Street finished higher. The Dow Jones and the S&P 500 gained 0.2%. The very technological Nasdaq has changed little.

In commodities, oil prices fell on Thursday as producers including Saudi Arabia and Russia objected to the need to extend the record production cuts put in place in the first wave of the pandemic COVID-19.

Brent fell 9 cents to $ 48.16 a barrel while US light crude fell 14 cents to $ 45.14.

Gold was up at $ 1,832.6 an ounce.