© Reuters. ARCHIVE PHOTO: A man wearing a face mask passes through a stock ticker outside a brokerage house amid the outbreak of coronavirus disease (COVID-19) in Tokyo
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By Huw Jones
LONDON (Reuters) – Stocks mixed up on Tuesday, when investors stopped to assess how much worse the COVID-19 pandemic could get while waiting for a new season of profits on Wall Street to inject new directions.
US bonds remained under pressure, with yields rising at their 10-month highs, although not yet at levels that make them more attractive than stocks, analysts said.
Blue chip indices in London, Paris and Frankfurt changed little at the beginning of Tuesday’s trading session. European stocks reached their highest levels in 10 months last week, but fell on Monday.
The main oil companies BP (NYSE :), Royal Dutch Shell (LON 🙂 and Total have gained from the increase in oil prices due to expectations of a reduction in US stocks.
“It is a short pause for reflection after taking an absolute flight this year,” said Michael Hewson, chief market analyst at CMC Markets.
“The main focus now is how much worse it can get compared to COVID in the UK and Europe, and whether China is starting to see evidence of a second wave,” added Hewson.
There was little news about big corporate profits or important economic data as markets waited for the new profit season on Wall Street, with banks JPMorgan (NYSE :), Citi and Wells Fargo (NYSE 🙂 reporting on Friday.
“The big conclusion of this will be how much more they will separate in terms of loan loss provision, since they were quite heavy in 2020, and how many American banks restart the repurchases and dividends,” said Hewson.
“I suspect there won’t be as many as people think.”
A bond sale was fueled by the prospect of further US government stimulus under President-elect Joe Biden, who will take office next week.
Yields were also supported by markets that anticipated bets on Federal Reserve interest rate hikes until 2023 and a withdrawal or reduction in asset purchases before that.
The yield on the US government’s 10-year benchmark debt, which increases when prices fall, gained 1.6 basis points to 1.149%, after reaching a new 10-month high of 1.1580%. [US/]
were 0.14% higher.
The US dollar maintained its recent gains, helped by rising US Treasury yields.
PROFIT
Consolidation was also an issue in Asia overnight, where the broader MSCI index for Asia-Pacific stocks outside Japan fell 0.5% after reaching a historic high on Monday, led by a decline 2.6% in South Korea, as investors made some profit from a growing Kospi. ()
Pharmaceuticals rose to a new record of three decades after reports of another effective treatment with COVID-19, although the rate dropped to 0.16% in the afternoon. ()
Strong inflows helped Chinese blue chips to rise 1.11%. [.SS]
The resurgence of the US dollar has clung to four days of gains against other major currencies, keeping the euro and the yen close to several-week lows. [FRX/]
“We have seen a very strong week or more (in stocks) and I think the lower movements we are seeing are a little bit of profit making,” said Chad Padowitz, chief investment officer at Talaria Capital in Melbourne.
Overnight, Nasdaq took modest losses on Wall Street, down 1.3% as investors sold tech giants who took action against Trump and his supporters. ()
rose 0.68% to $ 56.04 while trading at $ 52.65 a barrel, up 0.4%. [O/R]
Gold, sold as U.S. yields rise because it pays no interest, has stabilized at $ 1,853 an ounce, up 0.5% [GOL/]