Global markets static as virus surge offsets vaccine euphoria
The MSCI world index is flat but just off a record high as US retail sales highlight a fragile recovery and the dollar dips to new lows
London/Tokyo — Global shares were little changed and oil rose on Wednesday as weak US retail sales and a surge of new coronavirus cases dampened but did not extinguish the euphoria from recent Covid-19 vaccine breakthroughs.
The MSCI world index was flat at 8.23am GMT, just shy of the previous session’s record high.
European shares opened lower, with the Stoxx 600 index down about 0.1%, tracking weakness overnight in Japan, where the Nikkei fell 1.1% after coronavirus cases there rose to a high.
Elsewhere in Asia, the picture was more mixed. MSCI’s broadest gauge of regional shares rose 0.6%, helped by better handling of the pandemic in much of the region and the prospect of more stimulus in China.
US stocks fell overnight on the sales data and rise in Covid-19 cases, but were expected to hold steady at the Wall Street open on Wednesday, with S&P 500 futures flat.
“Overall, the picture for investors is brighter, but the recovery is likely to be uneven,” said Cormac Weldon, head of US equities at UK asset manager Artemis. “Low inventories and the need to manufacture and distribute goods are likely to be the first drivers of the recovery, with the re-emergence of consumer demand adding a powerful second phase.”
The market caution was reflected in other risk markets, with US crude futures up just 0.1%. Brent crude futures were up 0.4%.
In Europe’s debt markets, Germany saw its benchmark 10-year government bond yield fall to its lowest since Pfizer announced its Covid-19 vaccine update a week and a half ago.
“Yields continue to grind lower as more warning signs flash about the near-term outlook,” said Benjamin Schroeder, senior rates strategist at ING.
“Eurozone spreads appear to have eyes only for quantitative easing, shrugging off volatility and EU setbacks,” he said, referring to news this week that Hungary and Poland have blocked the adoption of the 2021-2027 budget and recovery fund by EU governments.
The retail sales report released by the US commerce department showed spending decelerating as the holiday shopping season approaches, amid a lack of fresh fiscal relief from Washington.
A skittish mood also swept investors as several US states began restricting gatherings and mandating face-coverings after more than 70,000 Americans were hospitalised for treatment of Covid-19.
The surge in new coronavirus cases comes as investors have hailed two promising vaccine trial results published earlier this month.
“We’re are coming out of a solid two weeks, so the market being down half a percent isn’t that bad with the prospect of Covid-19 lockdowns,” said Jamie Cox, managing partner for Harris Financial Group.
US Federal Reserve chair Jerome Powell noted the current surge in coronavirus cases is a big concern, and the economy will continue to need both fiscal and monetary policy support.
Against a basket of currencies, the dollar fell to 92.250, its lowest since November 9.
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