World shares down from record highs, COVID-19 cases surpassing 90 million

LONDON (Reuters) – Global equities slipped from record highs on Monday as cautiousness over rising coronavirus cases led to investor profit-taking, while Treasury yields remained close 10-month highs, indicating expectations of global reflation following the expected fiscal stimulus in the United States.

Coronavirus cases around the world topped 90 million on Monday, according to the Reuters tally.

European stocks fell early in the session, with an increase in coronavirus cases across the continent and China pushing commodity inventories lower. The German DAX lost 0.75%, the British FTSE 100, the Italian FTSE MIB and the French CAC 40 fell about half a percent each, and the Spanish IBEX fell 0.1%.[.EU]

With Asian stock markets also falling, the MSCI All Country World Index, which tracks shares of 49 countries, fell 0.2%, just after Friday’s record high.

S&P 500 futures have slipped 0.6% from record highs, after gaining 1.8% last week. EUROSTOXX 50 futures contracts fell 0.1% and FTSE futures remained stable.

“There was tremendous optimism about the prospects for a stimulus with the Biden administration winning these two seats in the Georgia Senate,” said Michael Hewson, chief market analyst at CMC Markets in London, noting Friday’s records.

“Friday’s payroll report was disappointing, highlighting the need for a more meaningful budget response. But as we move into week two (of the new year), I think some of that optimism has been tempered a bit by some profit taking. “

In Asia, the largest MSCI index of Asia-Pacific stocks outside of Japan fell 0.1%, after jumping 5% last week to record highs. Japan’s Nikkei was on vacation after closing at a 30-year high on Friday.

South Korea reversed an early jump to fall 0.1%, and Chinese blue chips fell 1%.

Wall Street bankers last week warned of trendy stock markets and an impending pullback after the exuberance of an unprecedented economic stimulus leading to “sparkling” asset prices.

“I think there is a perception that the markets may be slightly ahead of themselves,” Hewson said.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients that he did not see valuations as an obstacle to the continuation of the rally in equities, “particularly in the context of the continuation of policy. stimulus and vaccine deployment. “

Longer-term Treasury yields were at their highest since March, after weak jobs on Friday fueled speculation about more US fiscal stimulus now that Democrats are in control of the government.

President-elect Joe Biden is due to announce plans for “trillions” in new relief bills this week, much of which will be funded by increased borrowing.

At the same time, the Federal Reserve seems content to put responsibility for fiscal policy. Vice President Richard Clarida said the $ 120 billion in debt the Fed buys each month won’t change anytime soon.

With the Fed reluctant to buy longer-dated bonds, yields on 10-year Treasuries jumped nearly 20 basis points last week to 1.12%, the biggest weekly increase since June.

Treasury futures lost 3 more ticks early Monday.

Mark Cabana, of BofA, has warned that the stimulus could put pressure on the dollar and cause the Fed to fall later this year.

“An early collapse of the Fed creates upside risks to our 10-year cash target of 1.5% at year-end and supports our longer-term expectations of neutral rates towards 3%,” he said in a note to customers.

The poor payroll report will increase interest in US data on inflation, retail sales and consumer sentiment.

Profits will also be the focus as JP Morgan, Citigroup and Wells Fargo are among the first companies to release fourth quarter results on January 15.

The rise in rates in turn provided some support for the dollar, which had risen slightly to 90.338 against a basket of currencies from last week’s low of 89.206.

The euro fell to $ 1.2185 after a recent high of $ 1.2349, breaking support around $ 1.2190. The dollar also gained 104.18 yen after a low of 102.57 reached last week.

The sudden surge in bond yields undermined gold, which pays no interest, and fell 1.1% to $ 1,828 an ounce from its recent high of $ 1,959. [GOL/]

Oil prices saw profit taking after hitting their highest level in nearly a year on Friday, gaining 8% the week following Saudi Arabia’s pledge to cut production. [O/R]

Brent futures plunged 0.7% to $ 55.56. US crude futures fell 0.3% to $ 52.10 per barrel.