Global Markets: European shares sink to one-month lows as COVID-19 cases surge

In this news, we discuss the Global Markets: European shares sink to one-month lows as COVID-19 cases surge.

LONDON (Reuters) – European stocks fell in early trading on Tuesday as risk aversion swept through markets, with a resurgence of coronavirus cases threatening the global economic recovery and cautiousness ahead of the November 3 U.S. election.

Wall Street had its worst day in a month on Monday, and Asian markets also fell overnight.

The MSCI World Stock Index, which tracks shares of 49 countries, was down 0.1% at 8:28 a.m. GMT, after erasing some losses overnight after falling to a 19-day low during the previous session.

MSCI’s main European index was at its lowest for a month, down 0.5%.

The STOXX 600 also touched new one-month lows at the start of trading in London, down 0.4% on the day, as weakness from miners and automakers offset bullish results from blue-chip UK companies HSBC and BP.

“It’s hard to escape the feeling that investors are experiencing much higher levels of apprehension as to how the events of the next few days, as well as the coming weeks, are likely to unfold, with respect to the prospect of tighter restrictions and new lockdowns, ”wrote Michael Hewson, chief market analyst at CMC Markets UK, in a note to clients.

The United States has seen record COVID-19 infections, while in France authorities are considering options for stricter lockdown measures, as the virus has continued to spread despite some of the most stringent restrictions in France. Europe.

In Italy, protests against the lockdown restrictions took place on Monday, with violence reported in Milan and Turin.

The lack of progress towards the US fiscal stimulus also dampened sentiment.

US House of Representatives Speaker Nancy Pelosi is “optimistic” that a COVID-19 relief deal can be reached ahead of the election, her spokeswoman said on Monday, while the House’s economic adviser Blanche, Larry Kudlow, said talks have slowed down but are continuing.

UBS wrote in a note to clients that whoever wins the U.S. election, a fiscal stimulus bill would be passed soon after.

“While we would expect a fiscal stimulus to pass regardless of the election outcome, a ‘blue wave’ would likely increase its size and hasten its passage,” UBS said, referring to the possibility of a big win. by Democrat Joe BIden.

But CMC Markets’ Hewson said any fiscal stimulus could only come after a potential Biden inauguration, which would take place in January 2021.

One week before the US election, Wall Street’s “fear gauge”, the Cboe volatility index, hit its highest closing level since September 3.

Currency markets did not exhibit risk aversion to the same extent as stocks, with the dollar holding firm against a basket of currencies at 93.036 at 8:45 a.m. GMT.

The riskier Australian and New Zealand dollar edged up.

The euro was stable against the dollar and the euro-pound was also stable.

Brexit talks in London have been extended until Wednesday. Prime Minister Boris Johnson said Britain’s decision whether or not to agree to a Brexit deal with the European Union was “entirely separate” from the outcome of the US election.

Eurozone government bond yields have been broadly stable, with little appetite for major moves ahead of Thursday’s European Central Bank meeting. The benchmark German 10-year Bund was at -0.578%.

Oil prices rose after recent sharp losses, but sentiment was still subdued with Brent rising 48 cents, or 1.19%, to $ 40.94 a barrel at 9:00 a.m. GMT. US oil gained 39 cents, or 1.01%, to $ 38.95 a barrel.

On the vaccine front, hopes rose after AstraZeneca said on Monday that its injection developed with the University of Oxford produced an immune response in young and old adults.

But the sentiment was tempered by a British study, which found that antibodies to the new coronavirus were rapidly declining in the British population during the summer, suggesting that protection after infection may not last long.

Elizabeth Howcroft Report; Editing by Mark Potter

Original © Thomson Reuters

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