LONDON (Reuters) – Global stock markets faltered on Monday, as rising COVID-19 cases offset investors’ hopes of a quick economic recovery, even after data show the Chinese economy recovered faster than expected in fourth quarter of 2020.
European stocks as measured by the STOXX 600 index struggled for direction, trading 0.1% higher since 1446 GMT, after failed merger talks between French retailer Carrefour and Alimentation Couche-Tard reduced the opening gauge. The continent’s 50 largest shares fell 0.2% [.EU]
In Asia, Chinese chips gained 1.1% after the economy reported a 6.5% rise in the fourth quarter compared to a year earlier, exceeding the forecast of 6.1%.
Industrial production for December also exceeded estimates, although retail sales fell short of expectations.
“The recovery in domestic demand still does not have solid support,” said Lauri Halikka, a fixed income and FX strategist at SEB. “Sporadic virus outbreaks have intensified negative risks in the short term.”
China has reported more than 100 new cases of COVID-19 for the sixth day in a row, with rising infections in the Northeast fueling concern over another wave as hundreds of millions of people travel for the Lunar New Year holiday.
The new harsh controls in the city of Gongzhuling in Jilin Province, which has a population of about 1 million people, bring the total number of people closed to over 29 million.
Hallika said the impact of the latest regional bottlenecks and mass testing would probably be limited and short-lived.
The economic recovery in China was in stark contrast to the United States and Europe, where the spread of the coronavirus affected consumer spending, underlined by US retail sales reported on Friday.
Weak US consumer spending data last week helped the Treasury reduce some of its recent steep losses, and 10-year yields traded at 1.097%, down from last week’s peak of 1.187%.
The more sober mood, in turn, stimulated the US dollar safe haven, catching a deeply short rising market. Speculators increased their net position in short dollars to the highest since May 2011 in the week ending January 12.
Doubts are also evident as to how much of President-elect Joe Biden’s stimulus package will reach the Republican opposition Congress and the risk of greater violence at its inauguration on Wednesday.
BUBBLE?
Elsewhere in the Asian markets, the Japanese Nikkei fell 1% and exceeded the 30-year high.
The MSCI ‘All Country World index, which tracks stocks in 49 countries, traded 0.05% lower, down for the second session, after hitting record highs last week.
E-Mini futures for the S&P 500 traded flat, although Wall Street will be closed on Monday for a holiday.
Recent market price action has led investors to discuss whether asset markets can be overvalued.
In a monthly letter to clients last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, said all the prerequisites for a balloon were in place.
“Financing costs are record high, new entrants are attracted to markets, and the combination of high accumulated savings and low prospective returns on traditional assets creates both the means and the desire to engage in speculative activity,” he said.
He warned that in the coming months investors will have to pay special attention to “the risks of a reversal of monetary policy, rising equity values and the pace of post-pandemic recovery”.
Haefele said, however, that although he saw pockets of speculation, the wider capital market was not in a bubble.
Bitcoin traded 1.6%, bringing the USD 36,393.
The dollar index fell 0.06% to 90,818, the strongest since December 21, and far from its last 2-1 / 2-year level at 89,206.
The euro traded at $ 1.2072, the lowest level since December 2, while the dollar gained 0.15% against the yen at 103.73 and well above the last low of 102.57.
The European Central Bank will face more questions this week about an increasingly difficult outlook just one month after launching new incentives to support the eurozone economy.
The Canadian dollar fell to $ 1.2792 per dollar after Reuters reported that Biden was planning to revoke the license for the Keystone XL oil pipeline.
Biden’s election for Treasury Secretary Janet Yellen is expected to rule out a weaker dollar when he testifies Tuesday, the Wall Street Journal reported.
Gold prices rose 0.3 percent to $ 1,833 an ounce from its January high of $ 1,959.
Crude oil prices faced profits due to concerns, the spread of increasingly tight blockages globally would affect demand, a decline that also pulled the Russian ruble down 1.1%.
In the long run, crude oil fell 0.1% to $ 55.03 a barrel, while crude oil traded at $ 52.34.
Reporting by Ritvik Carvalho; additional reports by Wayne Cole in Sydney; Edited by Angus MacSwan, Hugh Lawson and Alison Williams