Doubts about stimulus, surging coronavirus cases cause stocks to dip
LONDON/SYDNEY (UK/AUSTRALIA) – With the global economic outlook clouded by the surging coronavirus cases in Europe and the US, global shares started the week on the back foot on Monday.
The US witnessed its highest ever new coronavirus cases in the past two days and France also set new records in terms of number of infections and Spain has announced a state of emergency. This scenario combined with no progress on a US stimulus package and the approaching presidential election dragged the MSCI world equity index down 0.2%.
In Europe, the Euro STOXX 600 dipped 0.8%, while S&P 500 futures dropped 0.9%.
“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 of what was a rather complacent market view of the outlook,” said James Athey, investment director at Aberdeen Standard Investments.
Milan’s blue-chip index witnessed a dip of 1.2% as new restrictions on public venues cast a pall of gloom over Friday’s positive news that ratings agency S&P Global upgraded the nation’s sovereign outlook to stable from negative.
The German DAX fell by as much as 2.7% to hit a three-month low after SAP let go of its medium-term profitability targets and warned its business would take longer than expected to make a comeback.
MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.2%. Nikkei of Japan finished 1% lower while South Korea’s main index lost 0.7%.
With Chinese leaders meeting to set the economic course for 2021, Beijing’s blue chips shed 0.6%. The leaders are balancing growth with reforms amid an uncertain global outlook and worsening ties with Washington.
Canada’s and Japan’s central banks are slated to hold fire for the time being while the market expects the European Central Bank will sound cautious with regard to inflation and growth.
Data due to be out on Thursday is expected to predict a consumer-led 31.9% rebound in US economic output in Q-3 after the second quarter’s historic collapse.
According to analysts at Westpac, such a bounce would still leave 2020 GDP around 4% below last year’s.