LONDON (Reuters) – Global stock markets faltered on Monday, with the rise in COVID-19 cases offsetting investors’ hopes for a rapid economic recovery, even after data showing that the Chinese economy recovered faster than expected in the fourth quarter of 2020.
European stocks, as measured by the STOXX 600 index, struggled for direction, last trading 0.1% higher at 1446 GMT, after failed merger negotiations between French retailer Carrefour and Alimentation Couche-Tard pulled the indicator down at the opening . The continent’s 50 largest inventories fell 0.2% [.EU]
In Asia, Chinese blue chips gained 1.1% after the economy grew 6.5% in the fourth quarter, compared to the previous year, exceeding forecasts of 6.1%.
December’s industrial production also exceeded estimates, although retail sales have lost expectations.
“The recovery in domestic demand still needs solid support,” said Lauri Halikka, SEB’s fixed income and foreign exchange strategist. “Sporadic virus outbreaks have intensified the risks of falling in the short term.”
China has reported more than 100 new cases of COVID-19 for the sixth consecutive day, with rising infections in the northeast fueling concern for another wave when hundreds of millions of people travel for the Lunar New Year holiday.
New tight controls in the city of Gongzhuling, in the province of Jilin, which has a population of about 1 million people, brings the total number of people arrested to more than 29 million.
Hallika said the impact of the latest regional blockades and mass tests is likely to be limited and short-lived.
The economic recovery in China was a marked contrast to the United States and Europe, where the spread of the coronavirus has hit consumer spending, underscored by the disappointing U.S. retail sales reported on Friday.
Weak US consumer spending data last week helped Treasury bills reduce some of its recent losses, and 10-year yields were trading at 1.097%, down from last week’s 1.177% top.
The more sober climate, in turn, boosted the safe-haven dollar, catching a deeply sold bear market. Speculators have increased their short dollar position to the highest since May 2011, in the week ending January 12.
Doubts are also evident about how much of the US President-elect Joe Biden’s stimulus package will make it through Congress, given the Republican opposition, and the risk of further violence in his possession on Wednesday.
BUBBLE?
Elsewhere, in Asian markets, Japan’s Nikkei fell 1% and fell from a 30-year high.
The MSCI’S All Country World index, which tracks stocks in 49 countries, was trading 0.05% lower, down for the second session, after breaking records last week.
The E-Mini futures for the S&P 500 were traded horizontally, although Wall Street is closed on Monday for a holiday.
The recent price action in the markets has prompted investors to discuss whether the asset markets may be overvalued.
In a monthly letter to customers last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, said that all the preconditions for a bubble were in place.
“Financing costs are at record levels, new entrants are being attracted to the markets and the combination of accumulated high savings and low prospective returns on traditional assets creates the means and the desire to engage in speculative activities,” he said.
He warned that in the coming months investors will need to pay special attention to “the risks of a reversal of monetary policy, increased stock appreciation and the rate of post-pandemic recovery”.
Haefele said, however, that while he saw pockets of speculation, the broader stock market was not in a bubble.
Cryptocurrency bitcoin was traded up 1.6%, reaching $ 36,393.
The dollar index fell 0.06% to 90.818, its strongest value since December 21, and far from its recent 2-1 / 2 year low at 89.206.
The euro traded stable at $ 1.2072, its lowest level since December 2, while the dollar gained 0.15% against the yen at 103.73 and well above the recent low at 102.57.
The European Central Bank will face more questions this week on an increasingly challenging outlook, just a month after releasing new stimuli to boost the eurozone economy.
The Canadian dollar fell to $ 1.2792 per dollar after Reuters reported that Biden planned to revoke the license for the Keystone XL pipeline.
Biden’s choice for Treasury secretary Janet Yellen is likely to rule out the search for a weaker dollar when testifying on Tuesday, the Wall Street Journal reported.
Gold prices rose 0.3%, to $ 1,833 an ounce, compared to the January peak of $ 1,959.
Crude oil prices have generated profits due to concerns that the spread of increasingly rigid blockages worldwide would hurt demand, a drop that also pulled the Russian ruble down by 1.1%.
Brent crude futures fell 0.1% to $ 55.03 a barrel, while US oil traded steady at $ 52.34.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; Editing by Angus MacSwan, Hugh Lawson and Alison Williams