LONDON (Reuters) – World equities fell from record highs on Monday as warnings of rising coronavirus cases returned investor profitability while treasury yields remained nearly ten months high, indicating expectations for global reflection of the expected US fiscal stimulus.
Worldwide cases of coronavirus exceeded 90 million on Monday, according to Reuters.
European stocks declined in early trading, with rising cases of coronavirus across the continent and China causing commodity stocks to decline. German DAX lost 0.75%, Britain’s FTSE 100, Italy’s FTSE MIB, and France’s CAC 40 each fell by about half a percent and Spain’s IBEX by 0.1%.[.EU]
Asian stock markets are also lower, and MSCI’s All Country World index, which tracks stocks in 49 countries, fell 0.2%, just below Friday’s record high.
The future for the S&P 500 declined from record highs by 0.6%, after reaching 1.8% last week. EUROSTOXX 50 futures contracted 0.1% and FTSE futures contracts were flat.
“There was an awful lot of optimism about the prospect of stimulation with the Biden government winning the two Senate-Georgian seats,” said Michael Hewson, chief market analyst at CMC Markets in London, noting Friday’s record highs.
“The report on the payroll on Friday was disappointing and emphasized the need for a more important fiscal response. But as we enter week two (of the new year), I think some of the optimism is a bit tempered with profit taking. ‘
In Asia, MSCI’s broadest Asia-Pacific equities index outside Japan fell 0.1%, after rising 5% last week to a record high. The Japanese Nikkei was on vacation after closing on Friday at a 30-year high.
South Korea reversed an early jump to 0.1%, and Chinese blue chips fell by 1%.
Last week, Wall Street bankers warned of turbulent stock markets and an impending retreat after exuberance of unprecedented economic stimulus led to a foaming asset price.
“I think there is a perception that markets are advancing themselves slightly,” Hewson said.
Mark Haefele, chief investment officer of UBS Global Wealth Management, said in a note to clients that he does not see valuations as an obstacle to continuing the stock market, especially against the backdrop of continued policy stimulation and vaccine deployment. ”
Treasury long-term returns have been at their highest since March, after Friday’s weak jobs fueled speculation of more U.S. fiscal stimulus now that Democrats are in control of government.
Elected President Joe Biden will this week unveil plans for ‘trillions’ in new bills, many of which will be paid for by increased loans.
At the same time, the Federal Reserve sounds content to enforce fiscal policy. Vice President Richard Clarida said there would soon be no change to the $ 120 billion debt the Fed buys every month.
As the Fed was reluctant to buy bonds over a longer period, ten-year treasury yields rose nearly 20 basis points last week to 1.12%, the largest weekly rise since June.
Treasury futures lost three more ticks early Monday.
Mark Cabana at BofA warned that stimulus could push the dollar further and that the Fed could decline later.
“An early decline in the Fed creates upside risks to our ten-year treasury target of 1.5% at year-end and supports our long-term expectations for neutral rates moving to 3%,” he said in a note. customers said.
The weak payroll report will increase interest in US data on inflation, retail sales and consumer sentiment.
Earnings will also be in focus as JP Morgan, Citigroup and Wells Fargo are among the first companies to announce fourth-quarter results on January 15th.
The rise in yields in turn offers some support to the dollar, which has risen to 90,338 against a basket of currencies from last week’s low of 89,206.
The euro retreated to $ 1.2185 from a recent high of $ 1.2349, breaking support of $ 1.2190. The dollar also rose to 104.18 yen from a 102.57 trough hit last week.
The sudden rise in bond yields undermined gold, which pays no interest, and it fell 1.1% to $ 1,828 per ounce from its recent high of $ 1,959. [GOL/]
Oil prices became lucrative after reaching their highest level in almost a year on Friday, up 8% on the week after Saudi Arabia promised to cut production. [O/R]
Brent crude futures fell 0.7% to $ 55.56. U.S. crude futures lost 0.3% to $ 52.10 a barrel.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; Edited by Larry King