© Reuters. ARCHIVE PHOTO: A passerby wearing a protective mask passes in front of a stock ticker, amid the outbreak of coronavirus disease (COVID-19) in Tokyo
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By Tom Arnold and Swati Pandey
LONDON / SYDNEY (Reuters) – Global equities fell to record highs on Friday, with gloomy data reminding investors of the difficulties facing the economic recovery, reducing a recovery fueled by hopes of US stimulus by newly incumbent President Joe Biden.
Sentiment in Europe was already more cautious after Thursday’s meeting of the European Central Bank, in which the bank’s message was perceived as more hawkish than expected.
Yield on 10-year-old Italian reference bonds has reached its highest level since the beginning of November, with reports that Prime Minister Giuseppe Conte may be tempted by the prospect of an early election.
The euro was 0.8% weaker as investors digested weaker PMI readings for January. Blocking restrictions to contain the coronavirus pandemic have hit the dominant service sector in the bloc.
The 0.5% drop, as data showed that British retailers struggled to recover in December from a partial coronavirus block in the previous month.
The MSCI world equity index, which tracks stocks in almost 50 countries, was 0.2% weaker after three consecutive earnings sessions. E-Mini futures fell 0.53%.
The broadest MSCI index for Asia Pacific stocks outside Japan was 0.8% lower.
The risk-loss climate followed a period of relief after the transition of power in the United States, culminating in Biden’s inauguration on Wednesday and strong expectations that the US stimulus will provide continued support for global assets.
“The fact that there would be stimulus in the US was well known and the package size and high-level details of what they intend with the package have been well known for some time,” said James Athey, chief investment officer at Aberdeen Standard Investments.
“The realities of what is likely to be achieved relatively quickly do not support blind buying of cyclical assets. There are far more nuances and far more policy to be adopted before we get there.”
Republicans in the US Congress have indicated that they are willing to work with Biden on his government’s top priority, a $ 1.9 trillion fiscal stimulus plan, although some are opposed to the price.
Democrats took control of the U.S. Senate on Wednesday, although they still need Republican support to approve the program.
The composite Chinese stock index fell 0.4%, while the CSI300 blue-chip index rose 0.1%.
Travel plans were in limbo for tens of millions of people in cities in northern China. They are under some kind of blockade amid fears that undetected coronavirus infections could spread quickly during the Lunar New Year holiday, which is only a few weeks away.
China reported 103 cases of COVID-19 on Friday.
In the foreign exchange markets, the US dollar stopped after three consecutive days of losses, although it was still on track to show its biggest weekly loss since mid-December. The currency was stable on the day at 90.118.
The Japanese yen fell about 0.1% against the dollar, at 103.63.
Overnight Japan data showed that manufacturing activity contracted in January and the service sector was more pessimistic when emergency measures to combat the resurgence of COVID-19 affected sentiment.
The recent fall in the dollar was led by investors who invest money in higher yielding currencies with optimism about a rapid economic recovery led by US stimulus.
In commodities, oil prices have been pressured by fears that further restrictions to the pandemic in China will reduce fuel demand at the world’s largest oil importer. [O/R]
futures fell 1.2% to $ 55.41 a barrel. was 1.4% lower to $ 52.39 a barrel.
dropped 0.4% to 1,862.3 an ounce.