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Global Markets: COVID recovery vs COVID reality

Published 07/02/2020, 08:05 PM
Updated 07/03/2020, 10:30 AM
© Reuters. FILE PHOTO: Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

© Reuters. FILE PHOTO: Man wearing a face mask is seen inside the Shanghai Stock Exchange building, as the country is hit by a novel coronavirus outbreak, at the Pudong financial district in Shanghai

By Marc Jones

LONDON (Reuters) - World shares stalled near a four-month high on Friday and the industrial bellwether metal copper scuffed its longest weekly winning streak in nearly three years, as nagging coronavirus nerves tempered the recent recovery run.

The market rally, fuelled by Thursday's record U.S. jobs numbers, largely blew itself out after a record daily total of new U.S. COVID-19 cases, though news of the fastest expansion in China's services sector in over a decade kept Asia's tail up early in the day.

Chinese shares had charged to their highest level in five years [.SS], helping the pan-Asian indexes to four-month peaks, so the sight of European markets stalling left traders floundering, especially with no Wall Street to pick things up again because of a U.S. market holiday. (EU)

Currency and commodity markets were also subdued after an otherwise strong week for confidence-sensitive stalwarts such oil, copper, sterling and the Australian dollar, which all struggled on Friday.

More than three dozen U.S. states are now seeing increases in COVID-19 cases, including Florida, where they have leapt above 10,000 a day. And while Europe is largely easing restrictions, some places are having to keep them or reimpose them again.

"I think infection rates and fears of localised lockdowns have doused some of the enthusiasm," said Societe Generale (OTC:SCGLY) strategist Kit Jukes.

"We have three elements now; vaccine hopes, decent data in most places - but also the return of infection rates, which can make you nervous."

London, Paris and Frankfurt's stock markets were down 1.2%, 0.4% and 0.8% respectively as trading began to wind down, although all were up for the week. The euro and pound were also fractionally lower, though it was barely noticeable thanks to the dollar's second dip of the week.

The euro was at $1.1226 and though it gained against the safe Swiss franc it fell versus the red-hot Norwegian crown, which has been on the rise for months, in tandem with most petrocurrencies.

S&P 500 futures were down 0.2% but volumes were low due to the U.S. market holiday for Independence Day.

The previous day's U.S. non-farm payrolls had shown a well-above-forecast 4.8 million surge in jobs in June. It came largely thanks to rises in the hard-hit hospitality sectors, though economists did note some caveats.

The number of permanent job losses continued to rise, increasing by 588,000 to 2.9 million, while the unemployment rate remains a chunky 7.6 percentage points above its February level. A Deutsche Bank (DE:DBKGn) analysis put the U.S. unemployment rate behind all its developed market peers, barring Canada.

WILL THE BEARS BITE BACK?

The recovery faces headwinds as the surge of new coronavirus infections prompts U.S. states to delay and in some cases reverse plans to let stores and restaurants reopen and activities resume.

BofA said in a report on Friday that $7.1 billion had been was pulled out of equity funds over the last week, and its closely-followed 'Bull & Bear' indicator was out of "buy" territory for the first time since March 17.

Nevertheless, investors seem to have been largely overlooking the various virus spikes for now at least, and taking the view that things are still improving globally.

A market fear gauge, the VIX volatility index, has seen its biggest drop in two months and German government bond yields were set for their biggest weekly rise in a month, though they nudged down on Friday to -0.44%.

Riskier Italian yields fell to 1.26% as well though, which is their lowest since late March, at the peak of Europe's coronavirus lockdown. [GVD/EUR]

Oil prices also eased after an otherwise solid week. Brent crude fell 0.65% to $42.86 a barrel while U.S. crude dropped 0.66% to $40.38 a barrel. Both were around $25 this time two months ago.

Copper prices were poised for a seventh consecutive weekly gain, their longest winning streak in nearly three years, though it too was slightly down on the day at $6,040 a tonne, more than $1,500 up from lows it plumbed in March. [/MET/L]

"The one issue that hangs over all the markets is 'Will we see a surge in secondary infections that will trigger a second wave of national rather than regional shutdowns?'," Malcolm Freeman, director of Kingdom Futures, wrote in a note.

Graphic: China recovery - https://fingfx.thomsonreuters.com/gfx/mkt/oakpeaxznpr/20703S.png

Graphic: COVID-19 in U.S. - https://fingfx.thomsonreuters.com/gfx/mkt/azgvorzmapd/20703D.png

© Reuters. FILE PHOTO:  A street cleaning operative walks past the London Stock Exchange Group building in the City of London financial district, whilst British stocks tumble as investors fear that the coronavirus outbreak could stall the global economy, in London

Latest comments

Covid up, covid down, covid up, covid down...what kind of economic and financial reasoning is that??...just give it a break.
In my 35+ years trading this is the most irrational exuberance I’ve ever seen. Take 1987 the.com bubble and 2008 roll it into one and that’s what we have. Any day now the market will correct. You just cannot be at these levels with all of these black swans a reality. It’s embarrassing and insulting to Americans to see the market just keep going up when people are homeless or don’t have food or money. Big correction coming this week
You did see the large "intentional shutdown" and resulting hugh drop in the market. It's just coming back ...what's your big issue?
that its not coming back. It corrected a little with people coming back to work but wait till next month. This will take a minium of two years to fully recover if everything goes perfectly. Dont rely on Trump and fox news or anyone from goldman to base your hopes on. Do a little research and your eyes will be opened
The overall market per individual companies is still significantly lower than the averages
Wish the world administrators paid more attention to the REAL long term health issues rather than attempting to FIX the SEEMINGLY SHORT TERM ( EVENTUALLY BECOMING LONG TERM PAIN) markets. Markets cannot be maniplulated forever - the Fed will HAVE TO YIELD one fine day. By then it would have done much more OVERALL damage than would have been otherwise.
China and usa are gearing up to grab the world market share..
Right now we are in pandemia wave 1.5 wait the end with deaths and later will see wave 2.0. Give time to the virus.
55000 new cases! hospitals running out of beds... wake up! !!!!
Probably more than that as the trump administration covers up the number of cases
real story:  Asian shares pulled sharply back from highs as the rally ran out of steam.
Aand monday is GREEN, babyy.
Good to know markets at highs.. how about the economy? infections?
What are we all up to this time around?
and the quality of "recovery"?
masks and lockdown have done nothing compared to countries who did not do masks and lock down. all just political nonsense. destroyed the economy because democrats are worried about november.
Bruh
give whoever wrote this title a raise for being homes and not mentioning the fake news "cases rising", which is just the result of more testing and detection of asymptomatic cases from the last several months
gather WHAT pace? 🤣🤣😂😂😂🤦🏽‍♂️🤦🏽‍♂️🤦🏽‍♂️🤦🏽‍♂️🤦🏽‍♂️🤦🏽‍♂️
The US should take care of their own citizens who are currently having difficult life instead of busybody on other countries issues.
Sino change good mind set and behavers other wise every one leave and ignore
Reuters is the leader in content free journalism
so lockdowns did nothing and mask are doing nothing. looks like all the fearmongering and hysteria was for nothing. COVID-1984 will die out on its own soon.
Until a vaccine comes, if one does the job.
DavidChinsect9000 we waiting... you filthy bug.
Lol... why you call me bug...explain yourself...we waiting.
The real will of this USA Administration is to admin China, instead of USA.Look at what is happening in US, simply, none of the administration cares.
They will when the food riots start at the end of July.
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