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Stocks sluggish, dollar near four-month highs as risk appetite wanes

EconomyMar 25, 2021 05:45AM ET
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© Reuters. A man is reflected on a stock quotation board in Tokyo

By Tom Arnold and Stanley White

LONDON/TOKYO (Reuters) - Global equities languished close to two-week lows on Thursday, while the dollar cruised to near a four-month high against the euro as nervy investors worried that Europe's COVID-19 response was falling behind that in the United States.

European markets opened lower, with the STOXX index of 600 European shares down 0.1% in early trade following a U.S selloff overnight and not helped by data showing the biggest rise since Jan. 9 in new confirmed coronavirus cases in Germany. The number of people with COVID-19 in French intensive care meanwhile set a high for 2021.

Extended lockdowns and worries about the pace of vaccinations across Europe hobbled the euro, which was down 0.1% against the dollar, at $1.1807.

The dollar index had hit its highest since November 2020 overnight, at 92.697, breaking its 200-day moving average.

"The dollar is absolutely critical," said James Athey, investment director at Aberdeen Standard Investments.

"While the 'reflation trade' has been largely driven by U.S. fiscal stimulus and thus growth and inflation expectations, it has also been driven by rising input prices coming from higher commodity prices.

"If the dollar starts rallying that becomes a problem. It means commodity weakness and emerging market weakness and it starts to provide a disinflationary countervailing narrative."

MSCI's gauge of world stocks was 0.03% lower, down for a second day and close to its lowest level in more than two weeks.

Its broadest index of Asia-Pacific shares outside Japan fell 0.2%, bringing it closer to wiping out all the gains it has posted so far this year.

Weighing on sentiment was a selloff in Chinese technology shares due to concerns they will be delisted from U.S. bourses and worries about a semiconductor shortage.

In Hong Kong, companies with U.S. listings led declines. JD (NASDAQ:JD).com lost 3.57% and Alibaba (NYSE:BABA) fell 3.91%.

China's blue-chip CSI300 index edged 0.05% lower, to its lowest close since Dec. 11, weighed down by jitters about policy tightening and rising tensions between China and Western countries over allegations of human rights abuses in Xinjiang.

U.S. stock futures pointed to a steadier start on Wall Street after Wednesday's tumble, with E-minis 0.3% firmer.

The U.S. securities regulator is introducing measures that would kick foreign firms off U.S. stock exchanges if they do not comply with U.S. auditing standards, and require them to disclose any government affiliations -- measures widely expected to hit Chinese companies.

As well as concerns about extended economic lockdowns in Europe, disruptions to the distribution of COVID-19 vaccinations and potential U.S. tax hikes also dimmed investor sentiment.

"Rising interest rates, uncertainty of tax policy, concern over inflation all remain top-of-mind for investors. However, none of these themes speak to rising appetite for risk," said Peter Kenny of Kenny's Commentary LLC and Strategic Board Solutions LLC in Denver.

U.S. crude fell 1.6% to $60.22 per barrel, and Brent fell 1.3% to $63.56 a barrel, giving back some gains made the previous day after one of the world's largest container ships ran aground in the Suez Canal, blocking the vital shipping lane.

Benchmark 10-year U.S. Treasury yields rose to 1.6209%, supported by positive data on the U.S. manufacturing sector.

Investors have focused on the 10-year Treasury yield, pondering if there is room for long-term interest rates to run, said David Kelly, chief global strategist at JPMorgan (NYSE:JPM) Asset Management.

"We know that the economy is primed to begin to really accelerate in the second quarter," Kelly said. "But we haven't seen that acceleration yet so that's what we're waiting for."

Germany's 10-year government bond yield was down one basis point to 0.37%.

Stocks sluggish, dollar near four-month highs as risk appetite wanes
 

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Comments (6)
David David
David9 Mar 25, 2021 12:49AM ET
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I told you guys... we learned before, when Trump taunted at the China Lion, she would Roar... so of we look to taunt at the China Lion again, she will Roar... when she does, worldwide markets will crumble back down...
Pablo Blanc
Pablo Blanc Mar 24, 2021 11:51PM ET
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Hope you bought the dip, its been loading zone last 2 days
AmericaIsKing oftheGalaxy
AmericaIsKing oftheGalaxy Mar 24, 2021 11:48PM ET
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They act like this isnt all coordinated. Thats pretty funny.
David David
David9 Mar 24, 2021 11:48PM ET
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How is it coordinated... give examples...
Gerald Zhang
Gerald Zhang Mar 24, 2021 11:48PM ET
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kuaishou fall in HK snap tme iq follows in US
AmericaIsKing oftheGalaxy
AmericaIsKing oftheGalaxy Mar 24, 2021 11:47PM ET
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Tax, no tax, billionares will still be able to feed their families the most expensive meals on the planet for every generation ever to be born.
Hunt Richardson
Hunt Richardson Mar 24, 2021 10:26PM ET
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of course the government will raise taxes. The tech and media conglomerates that helped the Democrats win the election are in for a big tax surprise
Jeremy Thornton
Jeremy Thornton Mar 24, 2021 10:26PM ET
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Good... they are getting too far and our people are poor.
Jeremy Thornton
Jeremy Thornton Mar 24, 2021 10:26PM ET
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#fat
Hanis ZA
Hanis ZA Mar 24, 2021 10:26PM ET
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Good Move. All the big investors will take out all of their money from US market and put it into the emerging markets.
zryeup up
zryeup up Mar 24, 2021 10:26PM ET
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let's see if the government will become more and more heavy handed in reclaiming assets
me ish
me ish Mar 24, 2021 10:26PM ET
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Hanis ZA  and crypto
Leon Kelly
Leon Kelly Mar 24, 2021 9:21PM ET
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If the Nikkei falls below 28308.. it's going to get very ugly.
 
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