LONDON (Reuters) – World equities fell from record highs on Monday, due to caution with the growing cases of coronavirus that generated some profit taking by investors, while Treasury yields remained close to 10-month highs, indicating expectations of a global reflection of the anticipated US fiscal stimulus.
Coronavirus cases worldwide exceeded 90 million on Monday, according to the Reuters count.
European equities fell at the beginning of the session, with the increase in coronavirus cases across the continent and China reducing commodity stocks. Germany’s DAX lost 0.75%, Britain’s FTSE 100, Italy’s FTSE MIB and France’s CAC 40 fell by around half a percent each, and Spain’s IBEX fell 0.1%.[.EU]
With Asian stock markets also down, the MSCI All Country World index, which tracks stocks in 49 countries, fell 0.2%, well below Friday’s record.
S&P 500 futures contracts fell 0.6% from record highs, after gaining 1.8% last week. EUROSTOXX 50 futures declined 0.1% and FTSE futures were stable.
“There was a lot of optimism about the prospects for stimulus with the Biden government winning these two seats in the Georgia Senate,” said Michael Hewson, chief market analyst at CMC Markets in London, looking at Friday’s records.
“Friday’s payroll report was disappointing, underscoring the need for a more meaningful fiscal response. But as we move into the second week (of the new year), I think some of that optimism has been tempered by profit making. “
In Asia, the broader MSCI index for Asia Pacific stocks outside Japan fell 0.1%, having shot up 5% last week to record highs. Japan’s Nikkei was on vacation after closing the maximum at 30 on Friday.
South Korea reversed an initial jump to fall 0.1%, and Chinese blue chips fell 1%.
Last week, Wall Street bankers warned of rising stock markets and an imminent pullback after the exuberance of unprecedented economic stimulus led to “foamy” asset prices.
“I think there is a perception that markets are a little ahead of themselves,” said Hewson.
Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients that he does not see the valuations as a barrier to the stock recovery continuing, “especially against the backdrop of continued policy stimulus and vaccine delivery. . “
The Treasury’s long-term earnings have been at their highest levels since March, after Friday’s weak job report fueled speculation about further US fiscal stimulus, now that Democrats have control of the government.
President-elect Joe Biden is expected to announce plans for “trillions” of new relief bills this week, many of which will be paid for by larger loans.
At the same time, the Federal Reserve seems pleased to place the burden on fiscal policy. Vice President Richard Clarida said there will be no changes soon in the $ 120 billion in debt the Fed is buying each month.
With the Fed reluctant to buy longer-term bonds, 10-year Treasury yields jumped nearly 20 basis points last week to 1.12%, the biggest weekly increase since June.
Treasury futures lost 3 more ticks on Monday morning.
Mark Cabana of BofA warned that the stimulus could put further pressure on the dollar and cause the Fed’s gradual reduction to begin later this year.
“An early Fed reduction creates upside risks to our 10-year Treasury target of 1.5% at the end of the year and supports our long-term expectations for neutral rates moving to 3%,” he said in a note to customers. .
The low payroll report will increase interest in US data on inflation, retail sales and consumer sentiment.
The gains will also be in focus, as JP Morgan, Citigroup and Wells Fargo are among the first companies to release fourth quarter results on January 15.
The rise in yields, in turn, offered some support for the dollar, which rose to 90.338 against a basket of currencies since last week’s low of 89.206.
The euro retreated to $ 1.2185 from a recent top of $ 1.2349, breaking the support around $ 1.2190. The dollar also rose to 104.18 yen, from a 102.57 low last week.
The sudden increase in bond yields undermined gold, which pays no interest, and fell 1.1%, to $ 1,828 an ounce, from its recent peak of $ 1,959. [GOL/]
Oil prices reached their highest level in almost a year on Friday, gaining 8% in the week after Saudi Arabia promised to cut production. [O/R]
Brent crude futures fell 0.7% to $ 55.56. US oil futures lost 0.3% to $ 52.10 a barrel.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; edition by Larry King