Markets down due to widening COVID-19 restrictions

LONDON: World stocks eased for the third day in a row and oil fell on Thursday, with Wall Street also eyeing a weaker open, as widening COVID-19 restrictions weighed on market sentiment.

Positive news about possible vaccines had helped push the MSCI World Index to a record high earlier in the week, but investors pulled back as a host of countries announced record infection rates and tougher lockdowns.

At 1202 GMT, the broad gauge of global equities was trading down 0.3%, pulled lower by weakness in most of Europe’s leading indexes . U.S. stock futures were down 0.1%.

Oil prices also fell 0.4% to 0.9% as virus restrictions crimped demand expectations.

The weaker sentiment was triggered by a late U.S. sell-off that saw the S&P 500 close down 1.1%, following news that the country’s COVID-19 deaths had passed 250,000, seting off a host of lockdowns.

Similarly sombre news in Japan, which saw a record number of cases and a rise in Tokyo’s pandemic alert level, sent the Nikkei down 0.4%. MSCI’S broadest index of Asia-pacific shares outside Japan fell 0.8%.

“The markets probably overshot the vaccine news and are probably just retreating slightly now because case numbers are going up,” said Gavin Rochussen, chief executive of Uk-based asset manager Polar Capital.

“The vaccine will take time to be delivered, to be administered and so on, and I think what’s happening is markets are realising that ... it’s not just the silver bullet, it will take time.”

The positive vaccine news had continued yesterday ater Pfizer said its COVID-19 vaccine was 95% effective and it would apply for emergency U.S. authorization within days, following a similar recent report from Moderna.

German benchmark 10-year debt yields fell 1.5 basis points to -0.571% and Italy’s 10-year BTP yield was up 0.5 basis points at 0.621%. Both were near recent lows. “Markets remained in limbo as vaccine hopes and fears about the fallout of still-rising COVID-19 cases cancelled each other out,” Unicredit told clients.

“Rising coronavirus infection numbers and new restriction measures implemented in the US are weighing on appetite for risk,” it said.

Looking ahead, all eyes will be on the US Federal Reserve for signs it could step in with fresh monetary stimulus — something two officials nodded to on Wednesday. . Investors will also await U.S. jobs data at 1330 GMT.

Against a basket of currencies, the dollar was last at 92.543, near its weekly opening high. Euro/dollar shed 0.1% to last trade at $ 1.1836.

“The vaccines news are a positive mediumterm impulse for the global economic outlook and investors are trying to weigh that against the prospect of an imminent stalling of the European and U. S. recovery amid the prospect of extensions of current lockdown measures,” said Rodrigo Catril, a senior FX strategist at NAB.

Sterling weakened, down 0.1% against the dollar and 0.2% per euro, on a report Europe’s leaders would demand the European Commission publish Brexit no-deal plans as the deadline for trade talks go down to the wire.

Gold traders continued to take a longer-term view, beting the COVID-19 vaccines would translate into a quicker economic recovery. That sent the precious metal to a one-week low.

Bitcoin, sometimes regarded as a safe haven or at least a hedge against inflation, also pulled back and last stood at $17,720.

Gold fell to a one-week low on Thursday as the dollar regained momentum and optimism that progress on vaccine development would hasten economic recovery eroded bullion’s safe-haven appeal. Spot gold fell 0.6% to $1,859.38 per ounce by 1113 GMT, having earlier hit its lowest since Nov. 9 at $1,854.60. U.S. gold futures slipped 0.9% to $1,857.60. Gold is the victim of optimism over a coronavirus vaccine and a strengthening dollar pushing it towards the botom end of its range, Michael Hewson, chief market analyst at CMC Markets UK, said.

“U.S. fiscal stimulus remains an issue because (Donald) Trump hasn’t yet conceded the presidential election, so fiscal support remains far away,” he added. The dollar , considered a rival safe haven, was up 0.3% versus rivals, benefiting from uncertainties over a spike in new coronavirus cases in the United States and resultant restrictions.

Rising cases in Europe too pushed world stocks further away from record peaks scaled ater promising vaccine announcements from Pfizer and Moderna. The vaccines could be ready for U.S. authorisation within weeks, U.S. Health and Human Services Secretary Alex Azar said on Wednesday.