GLOBAL MARKETS -Virus, stimulus angst hit world stocks as safe U.S. dollar shines

  • 10/15/2020
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NEW YORK/LONDON, Oct 15 (Reuters) - Global shares dropped on Thursday as investors shied from risk and sought safe-havens such as the U.S. dollar on fears that a resurgence in coronavirus cases and a lack of more U.S. fiscal stimulus would hobble the world economy. An unexpected rise in U.S. weekly jobless claims figures added to worries that the U.S. economy may sputter if government does not act soon to shore up growth, especially in the face of a spike in COVID-19 cases in Europe. The run of negative news dragged on European shares, which were on course for their worst day in 3-1/2 weeks. An offer by U.S. President Donald Trump on Thursday to raise the size of a U.S. fiscal stimulus package to win the support of Republicans and Democrats helped to narrow losses in equity markets, though many investors still believe a deal is not possible before the Nov. 3 election. The S&P 500 fell 17 points, or 0.5%, to 3,472.06, while the Dow Jones Industrial Average shed 59 points, or 0.2%, to 28,452.89. The Nasdaq Composite lost 119 points, or 1%, to 11,648.74. “Virus restrictions across Europe continue to sour sentiment,” wrote Win Thin and Ilan Solot, currency strategists at BBH Global Currency Strategy, adding that a U.S. fiscal stimulus package is “deader than Elvis.” “Now, the U.S. economy goes into the winter months without much-needed fiscal stimulus,” they wrote in a note. The pan-European STOXX 600 skidded 2.1% to a near two-week low, marking its biggest one-day fall in almost -1/2 weeks. London’s FTSE 100 fell 1.7% to a near two-week low as worries about the pandemic and uncertainty around a Brexit trade deal spurred investors to book profits. MSCI’s broadest index of Asia-Pacific shares lost 1.3% with Hong Kong and India both down over 2% and Japan’s Nikkei closing down 0.5%. Underlining concerns about the health of the world economy, data showed on Thursday China’s factory gate prices fell at a faster-than-expected rate in September while consumer inflation slowed to its weakest pace in 19 months. The shift toward safety helped the U.S. dollar, a traditional safe-haven asset. The greenback jumped 0.4% against a basket of six major currencies to 93.809. A firmer dollar dragged on sterling, already hammered by concerns about the obstacles that keep the European Union and Britain from reaching a trade deal by Dec. 31. The pound slumped 0.9% to $1.2896. The euro drooped 0.4% against the dollar to $1.1694, barely budging on comments by European Central Bank President Christine Lagarde that the ECB was ready to ease policy further if needed. Traders’ preference for safety helped government bonds. Germany’s government bonds rallied to leave their yields at their lowest level since the March spread of COVID-19 caused a global meltdown in stock markets and other riskier assets. Gold reversed earlier losses to trade in the black, helped in part by Trump’s comments that he was keen on more U.S. fiscal stimulus before the November election. Spot gold edged up 0.3% to $1,906.56 per ounce. Oil prices, however, were weighed by concerns about the coronavirus and its impact on the world economy, though losses narrowed compared to earlier in the day. Brent crude futures dropped 0.6% to $43.07 a barrel, while U.S. West Texas Intermediate crude futures fell 0.4% to $40.89 a barrel.

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