Global stocks falter as COVID-19 fears outweigh hopes of recovery

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

European stocks as measured by the STOXX 600 index have struggled to move, with the latest trading 0.1% higher at 2:46 p.m. GMT, after merger talks between French retailer Carrefour failed. and Alimentation Couche-Tard which lowered the gauge on opening. The continent’s 50 biggest stocks fell 0.2% [.EU]

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 strong support,” said Lauri Halikka, SEB fixed income and currency strategist. “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.

China’s economic recovery was in stark contrast to the United States and Europe, where the spread of the coronavirus hit consumer spending, underscored 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.

BUBBLE?

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

MSCI’s All Country World Index, which tracks shares of 49 countries, fell 0.05%, 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.

Recent price movements in the markets have made investors wonder if the asset markets could be overvalued.

In a monthly letter to clients last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, said all the prerequisites 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.

He warned that in the coming months, investors should pay close attention to “risks of monetary policy reversals, rising stock 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.

The cryptocurrency bitcoin traded up 1.6%, reaching $ 36,393.

The dollar index fell 0.06% to 90.818, its strongest since Dec. 21, and moves away from its recent 2-1 / 2 year low at 89.206.

The euro held steady at $ 1.2072, its lowest since December 2, while the dollar gained 0.15% against the yen at 103.73 and well above the recent low at 102.57 .

The European Central Bank will this week face more questions about an increasingly difficult outlook just a month after triggering new stimulus measures to support the eurozone economy.

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 0.3% to $ 1,833 an ounce, from its high of $ 1,959 in January.

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 fell 0.1% to $ 55.03 a barrel, while US crude traded at $ 52.34.