LONDON (Reuters) – Global stock markets faltered Monday as rising COVID-19 cases offset investors’ hopes for a rapid economic recovery, even after data showed the Chinese economy recovered faster than expected in the fourth quarter of 2020.
European stocks as measured by the STOXX 600 index struggled to give direction, the latter trading 0.1% higher from 1446 GMT, after failed merger talks between French retailer Carrefour and Alimentation Couche-Tard dragged the meter down. The continent’s 50 largest stocks fell 0.2% [.EU]
In Asia, China’s blue chips rose 1.1% after the economy reportedly grew 6.5% in the fourth quarter, compared to a year earlier, surpassing predictions of 6.1%.
Industrial production for December also exceeded estimates, although retail sales exceeded expectations.
“The recovery in domestic demand is still not supported,” said Lauri Halikka, SEB fixed income strategist and FX strategist. “Sporadic virus outbreaks have increased short-term downside risks.”
China reported more than 100 new COVID-19 cases for the sixth consecutive day, with rising infections in the Northeast fueling a new wave of concerns as hundreds of millions of people travel for the Lunar New Year holiday.
Tough new controls in Gongzhuling City, Jilin Province, home to about 1 million people, brings the total number of people under incarceration to more than 29 million.
Hallika said the impact of the latest regional lockdowns and mass tests is likely to be limited and short-lived.
The economic boom in China contrasted sharply with the United States and Europe, where the spread of the coronavirus has hit consumer spending, underscored by the bleak US retail sales reported Friday.
Poor US consumer spending data from last week helped Treasuries recoup some of their recent steep losses, and the 10-year yield traded at 1.097%, down from last week’s high of 1.187%.
In turn, the more down-to-earth mood boosted the safe-haven US dollar, driving a bearish market deeply short. Speculators increased their net dollar short position to the largest since May 2011 in the week ending January 12.
Also clear are doubts about how much of US President-elect Joe Biden’s stimulus package will make it through Congress, given Republican opposition, and the risk of more violence at his inauguration on Wednesday.
BUBBLE?
Elsewhere, in Asian markets, Japan’s Nikkei fell 1% from its 30-year high.
MSCI’s All Country World Index, which tracks stocks in 49 countries, was down 0.05%, for a second session after hitting record highs last week.
E-Mini futures for the S&P 500 traded flat, although Wall Street will be closed Monday due to a public holiday.
Recent price movements in markets have prompted investors to discuss whether the asset markets may be overvalued.
In a monthly letter to clients last week, Mark Haefele, chief investment officer at UBS Global Wealth Management, said all the conditions for a bubble were met.
“Financing costs are at record lows, new entrants are being drawn to markets, and the combination of high accumulated savings and low expected returns on traditional assets creates both the resources and the desire to engage in speculative activities,” he said.
He warned that investors should pay particular attention in the coming months to “the risks of a monetary policy turnaround, rising stock valuations and the pace of the post-pandemic recovery.”
However, Haefele said that while he saw speculation, the broader stock market was not in a bubble.
Cryptocurrency bitcoin traded 1.6%, bringing in $ 36,393.
The dollar index fell 0.06% to 90.818, the strongest since December 21, and away from the recent 2-1 / 2 year low of 89.206.
The euro was trading flat at $ 1.2072, to its lowest level since December 2, while the dollar rose 0.15% against the yen at 103.73 and well above its recent low of 102.57.
The European Central Bank will be faced with more questions this week about an increasingly challenging outlook, just a month after providing fresh incentives to strengthen the eurozone economy.
The Canadian dollar fell to $ 1.2792 a dollar after Reuters reported that Biden planned to revoke the license for the Keystone XL oil pipeline.
Biden’s choice of Treasury Secretary Janet Yellen is expected to rule out the search for a weaker dollar from his testimony on Tuesday, the Wall Street Journal reported.
Gold prices rose 0.3% to $ 1,833 an ounce, from the January high of $ 1,959.
Crude oil prices ran into gains as fears that the spread of tightening lockdowns would hurt global demand, a drop that also dragged the Russian ruble down 1.1%.
Brent crude futures fell 0.1% to $ 55.03 a barrel, while US crude traded flat at $ 52.34.
Reporting by Ritvik Carvalho; additional reporting by Wayne Cole in Sydney; Edited by Angus MacSwan, Hugh Lawson and Alison Williams