Global markets: Sentiment sapped by COVID surge, stimulus stalemate

In this news, we discuss the Global markets: Sentiment sapped by COVID surge, stimulus stalemate.

LONDON (Reuters) – Global stocks fell to their lowest level for two weeks on Thursday, and oil stabilized after another sharp fall, as the surge in global COVID-19 cases and intense discussions over the US stimulus have kept financial markets cautious.

The first stock declines in Europe were their fourth in a row, while a disappointing survey of German consumer sentiment also meant it was the first drop of the week for the top-flight euro.

The continent has seen the number of coronavirus cases reach an all-time high, with Spain becoming the first country in Western Europe to surpass one million infections and France, Britain and Italy all seeing increases record recently.

The cautious bond market also pushed up yields on sensitive Italian government debt ahead of a 30-year bond sell there, as traders shifted back to ultra-safe German Bunds.

“In the summer we were in the eye of the storm, I think,” said Rabobank strategist Piotr Matys, comparing the drop in COVID-19 cases to the lull that is occurring amid hurricanes.

“Some governments assumed the worst was over … but now the invisible enemy strikes even harder and I worry about the fragile economic recovery.”

Sentiment was also shaken after US President Donald Trump on Wednesday accused rival Democrats of not wanting to work out an acceptable compromise on further stimulus measures, following reports of progress earlier today.

It is still unclear whether negotiations will continue before the US presidential and legislative elections on November 3.

“We still believe that this deal will remain elusive in the sense that this amount we are talking about, $ 1.88 trillion, or about 9% of GDP,” Carlos Casanova, senior economist at Union Bancaire Privee (UBP) told Hong Kong.

President Nancy Pelosi’s package is even higher at around 10% of GDP.

“Even if the two sides manage to come to an agreement, given the tight deadline leading up to the elections, it is unlikely that anything like this can pass through the Senate smoothly,” Casanova said.

In currency markets, the dollar edged up 0.1% against the yen to 104.66, while the weaker euro saw it retreat 0.12% to $ 1.1847.

But against a basket of major peers, the dollar appeared relatively unaffected by setbacks in stimulus talks, stabilizing after hitting a seven-week low to trade slightly higher at 92.736.

Overnight, the MSCI’s largest Asia-Pacific stock index outside of Japan slipped 0.3%, while the Nikkei closed 0.7% lower.

LOOMING ELECTION

Uncertainty over whether to pass a bill to boost an economy ravaged by a pandemic comes as the United States also faces a new wave of COVID-19 cases.

Nearly two-thirds of U.S. states were in a danger zone for the spread of the coronavirus and six, including the electoral battlefield of Wisconsin, reported a record one-day increase in deaths from COVID-19 on Wednesday.

The top three Wall Street averages closed lower on Wednesday after a choppy trading session, and futures markets gave another moderate start later.

“The focus is on how a decisive victory in this election can unlock fiscal stimulus,” JP Morgan Asset Management global market strategist Hugh Gimber said, warning investors, however, that investors should treat with care the US vote next month.

The benchmark 10-year US Treasury yield fell to 0.8092%, following a US close of 0.816% on Wednesday.

In commodities markets, oil prices stabilized after steep losses on Wednesday, when rising gasoline inventories in the United States signaled further deterioration in fuel demand.

U.S. West Texas Intermediate (WTI) crude futures hovered around $ 40 a barrel and Brent futures rose 0.3% to $ 41.85.

Gold eased as the dollar edged up, with spot gold down 0.4% to 1,916 an ounce.

Report by Andrew Galbraith in Shanghai; Additional reporting by Jessica DiNapoli in New York; Edited by Jane Wardell, Michael Perry, Kim Coghill and Alex Richardson

Original © Thomson Reuters

Originally posted 2020-10-22 02:46:11.

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