LONDON (Reuters) – Global stock markets plunged on Monday as investors waited to see if US gains would justify high valuations, while a bond rally could be tested by what should be strong readings for US inflation and retail sales this week.
The MSCI All Country World Index, which tracks shares in 49 countries, fell 0.25% after European trading began, outside of Friday’s record high.
European equities fell to record highs as investors stopped making big bets before the winning season. The pan-European STOXX 600 index fell 0.3% to 0813 GMT.
The British FTSE mid 250 index, focused on the domestic market, fell by 0.6%, but recorded a record level, as shops, pubs, gyms and hairdressers reopened after a three-month lockdown.
The more export-oriented FTSE 100 in the UK fell by 0.9%, the German DAX fell by 0.1% and the CAC 40 in France fell by 0.2%. The FTSE MIB in Italy was the only winner, up 0.05%.
The VIX volatility index, also known as the “fear gauge” on Wall Street, ticked slightly to 17.44, reaching its lowest level since March 2020 on Friday.
“The decline indicates that investor sentiment is improving amid perceived market risk in retreat,” strategists from BCA Research said in a note to clients. “This progress is in line with other market developments: the S&P 500 is setting all-time highs, and Treasury bond yields have risen since August, supported by improved economic prospects.”
Earlier in Asia, Tokyo’s Nikkei fell 0.6%. South Korean stocks were almost fixed.
The Nifty 50 index fell 2.4% as India overtook Brazil to become the country with the second highest number of COVID-19 cases.
Chinese blue chips lost 1.5% before a series of economic figures in the country.
Shares of Alibaba Group Holding Ltd rose 16 percent after China imposed a record $ 18 billion ($ 2.75 billion) fine on the e-commerce giant. More than a third of the shares are owned by US investors and represent more than 8% of the MSCI EM index.
Nasdaq futures fell 0.1% on Monday. The S&P 500 futures fell 0.2%.
Growth and technology stocks rebounded last week as US 10-year Treasury yields fell to 1.65% from a 14-month high of 1.776%.
Over the weekend, Federal Reserve Chairman Jerome Powell said the economy was about to start growing faster, although the coronavirus remained a threat.
This week’s data should show that US inflation rose in March. Retail sales are seen rising, perhaps even with a double-digit gain. The Treasury is also set to test demand with $ 100 billion in debt offers this week.
“Recent US economic data has strengthened the narrative of reflection, with the strongest ISM Services survey since 1997 and positive signals in the labor market,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.
“We also expect an increase in European growth as vaccination programs increase. However, as the recharged demand meets supply constraints, rising inflation could disturb investors.
US banks open their first-quarter earnings season this week, with Goldman Sachs, JPMorgan and Wells Fargo reporting on Wednesday.
Analysts expect profits for the S&P 500 to show a 25% jump from a year earlier, according to IBES Refinitive data. This would be the strongest performance for the 2018 quarter.
The withdrawal of yields was enough to see how the dollar came out of the boil last week. The last trade was 92,254 against a basket of currencies, down from a peak of 93,439.
It was lower against the yen at 109.39. The euro remained at $ 1.1879 and above its recent value of $ 1.1702.
Gold prices remained at $ 1,737 an ounce after failing to sustain a $ 1,758 high last week.
Oil prices fell by about 2% last week as production rose and the renewal of COVID-19 blockades in some countries offset optimism about a recovery in fuel demand.
Brent was 0.1% lower on Monday at $ 62.93 a barrel. US crude oil fell 0.2% to $ 59.22.
Reporting by Ritvik Carvalho; additional reports by Wayne Cole in Sydney; edited by Larry King