Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Groggy Europe keeps stocks shy of record highs

Published 2020-08-12, 07:48 p/m
Updated 2020-08-13, 06:00 a/m
© Reuters. Passersby wearing protective face masks, following an outbreak of the coronavirus, are reflected on a screen displaying stock prices outside a brokerage in Tokyo

© Reuters. Passersby wearing protective face masks, following an outbreak of the coronavirus, are reflected on a screen displaying stock prices outside a brokerage in Tokyo

By Marc Jones

LONDON (Reuters) - World stocks' return to record highs looked set to be delayed for another day on Thursday, as stalemate in U.S. stimulus talks, trade war angst in both Europe and China and the COVID-19 pandemic all reined the bulls back.

A leap from Japan's Nikkei in Asia (T) after Wall Street's S&P 500 had finished just points off its record high (N) had bolstered hopes of a breakthrough, but Europe had other ideas.

The STOXX 600 (STOXX) was on course to snap a four-day winning streak after Washington said it would maintain 15% tariffs on planes and 25% tariffs on other European goods, while tourism giant TUI (L:TUIT) sank 4% as it reported an eye-watering 1.1 billion euro loss. (EU)

"Although people think things are getting better, there is still so much uncertainty," said Louise Dudley, a portfolio manager at Federated Hermes in London.

The global rally has seen MSCI's world index (MIWD00000PUS) rise 50% since its March lows to stand just 1.4% off its all-time high. Dudley said it still had room to run, especially with companies cutting costs and working-from-home arrangements helping high-flying tech and internet stocks.

In the currency and bond markets, normal service resumed as a decline in hopes for a compromise between Republicans and Democrats over additional stimulus for the U.S. economy pushed the dollar (=USD) down 0.3% against most of its peers. [/FRX]

A selloff in benchmark government bond markets also eased, as investors digested the biggest ever 10-year U.S. debt sale and some surprisingly strong U.S. inflation figures.

Benchmark German 10-year government yields were down 1.2 basis points at -0.45% (DE10YT=RR). Consumer prices there, harmonised for comparability with other European countries, were confirmed down 0.5% in July from the previous month.

Traders will be watching for the U.S. initial jobless claims later in the day, with economists polled by Reuters expecting a fall.

"The volatility of yields is just a reality that we have to deal with at the moment." said Brian Jacobsen, at Wells Fargo (NYSE:WFC) Asset Management.

Central banks like the U.S. Federal Reserve are "not going to take the punch bowl away this time", he said. "In fact, they are going to wait until the party is very much over until they take it away."

JAPAN JUMP

In Asia, Japanese stocks were the main mover, soaring 1.8% to a six-month peak (N225) on gains from chip firms. (T)

Markets are still eagerly awaiting a breakthrough in wrangling over the next U.S. stimulus package, though with little sign of progress the euro (EUR=) poked back above $1.18 and Turkey's troubled lira was able to grab some respite. [EMRG/FRX]

The Australian dollar nudged ahead too after better-than-expected jobs figures - though the fact that unemployment topped a million for the first time ever capped gains.

Australia was also the outlier in regional equity markets, with selling of communications giant Telstra (AX:TLS) after a profit plunge dragging on the index (AXJO).

Korea's Kospi (KS11) led gains in other markets outside Japan, rising 0.7% to a two-year high, while in commodities, oil mostly clung to solid gains made overnight when a drop in U.S. crude inventories spurred hopes that fuel demand is recovering. [O/R]

Brent crude futures (LCOc1) were last 0.2% softer at $45.33 a barrel which was roughly where it was before COVID-19 began to spread out of Asia, while U.S. crude (CLc1) dipped by the same margin to $42.60 a barrel.

© Reuters. FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain

"People are looking at the glass half full, and testing the waters," said Bank of Singapore currency analyst Moh Siong Sim.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.