Global shares fell on Monday as surging coronavirus cases in Europe and the United States clouded the global economic outlook, while China’s leaders meet to plan the country’s economic future.
The United States has seen its highest-ever number of new COVID-19 cases in the past two days. France also set case records and Spain announced a state of emergency.
The coronavirus resurgence, along with no clear progress on a US stimulus package and caution before the November 3 US election, dragged the MSCI world equity index down 0.3 per cent. In Europe, the Euro STOXX 600 shed 1 per cent. S&P 500 futures fell 1 per cent.
“The decreasing likelihood of US fiscal stimulus pre-election, possibly even pre-year-end, as well as worsening virus numbers and increasing lockdown measures, all seem to be taking the shine off what was a rather complacent market view of the outlook,” said James Athey, investment director at Aberdeen Standard Investments.
Europe became the second region after Latin America to surpass 250,000 deaths on Saturday, according to news agency Reuters, as many European countries reported their highest number of COVID-19 cases in a single day.
Milan’s blue-chip index sank 1 per cent as new curbs on public venues overshadowed Friday’s news that ratings agency S&P Global had upgraded the nation’s sovereign outlook to stable from negative.
The German DAX slumped 2.7 per cent to a three-month low after software company SAP abandoned medium-term profitability targets and warned its business would take longer than expected to recover from the pandemic.
Sentiment was also hit by a survey showing German business morale fell for the first time in six months in October.
Reports of progress in a COVID-19 vaccine being developed by the University of Oxford and manufactured by drug maker AstraZeneca Plc helped limit some of the market sell-off, analysts said.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.2 per cent. Japan’s Nikkei finished 1 per cent lower, and South Korea’s main index lost 0.7 per cent.
Chinese blue chips shed 0.6 per cent as the country’s leaders met to chart the nation’s economic course for 2021-2025, balancing growth with reforms amid an uncertain global outlook and worsening relations with the United States.
In a packed week for monetary policy decisions, Canada’s and Japan’s central banks are expected to hold fire for now. Markets assume the European Central Bank will sound cautious on inflation and growth even if it skips a further easing.
Data due out Thursday is forecast to show a consumer-led 31.9 per cent rebound in US economic output in the third quarter, after the second quarter’s historic collapse.
Analysts at Westpac noted such a bounce would still leave 2020 GDP around 4 per cent below last year’s, with business investment still lagging badly.
As markets increasingly price in the likelihood of a Democratic president and Congress and resulting rise in government spending and borrowing, US 10-year Treasury yields hit their highest since early June last week at 0.8720%. They were trading at 0.81 per cent on Monday.
“We have raised the probability of a Democratic sweep, already our base case, from 40 per cent to just over 50 per cent and have increased our expectation of Biden to win from 65 per cent to 75 per cent,” NatWest Markets analysts said. “We see steeper US yield curves and a weaker USD as likely to prevail in our base case.”
Italian government bond yields slid across the curve, with short-dated yields falling to a one-year low, after S&P Global’s unexpected outlook upgrade.
The benchmark 10-year yield dropped 6 basis points to 0.70 per cent. Short-dated two-year Italian yields hit their lowest level in a year at -0.382 per cent.
Surging coronavirus cases sent investors to the safety of the dollar after it fell broadly last week.
An index tracking its value against a basket of currencies firmed 0.1 per cent to 92.92 , while euro/dollar – the most traded currency pair and part of the index – fell 0.3 per cent to 1.1826.
In commodity markets, gold was 0.1 per cent higher at $1,902.06 per ounce.
Oil prices extended last week’s losses as the prospect of increased supply and resurgent coronavirus infections worried investors.
Brent crude was down 1.9 per cent at $40.97 a barrel. US West Texas Intermediate (WTI) dropped 2.1 per cent to $39.03.