Home Stock & Shares Global stocks decline amid uncertainty over U.S. stimulus

Global stocks decline amid uncertainty over U.S. stimulus

by Jonathan Adams
Global stocks

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.1%, while Chinese shares opened in the red

Asian shares held tight ranges on Monday, as investors awaited developments on U.S. fiscal stimulus and coronavirus vaccines amid a resurgence of infections in Europe.

MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.1% weaker, though it was not too far from a June 2018 peak at 568.84.

Japanese markets were closed for a public holiday.

Australia’s .AXJO benchmark index slipped 0.5% while New Zealand’s .NZ50 stumbled 0.6%. Chinese shares opened in the red.

While the economic recovery continues, momentum is clearly slowing, Kathy Bostjancic, chief U.S. financial economist at Oxford Economics wrote in a note.

The second phase of the recovery will likely be bumpy and fraught with pitfalls, Bostjancic added. The development of the pandemic remains the overriding factor driving the economy, discussions on the fiscal policy, and ultra loose policy by the Fed.

On Friday, U.S. stocks declined with the Dow down 0.9%, the S&P 500 losing 1.1% and Nasdaq Composite dropping 1.07%.

The signal from futures was not very optimistic, with the S&P 500 e-minis ESc1 falling 0.1% and pointing to a weak start for Wall Street on Monday.

Coronavirus cases have now surpassed 30 million, casting a gloomy pall over prospects of a V-shaped economic recovery.

The biggest threat to global growth is a resurgent pandemic, with analysts fearing growth and inflation could surprise on the downside in the coming year. A lack of material development on U.S. stimulus package is also an overhang, they said.

Adding to worries, European countries from Denmark to Greece announced new restrictions on Friday to curb surging coronavirus infections in some of their largest cities, while Britain was reported to be considering a new national lockdown.

Where is the inspiration for the equity bulls, I ask? We have diminishing prospects of fiscal stimulus, crazy valuations and a firm focus on an ugly U.S. election and COVID shutdowns, which suggest short-term risks for equities, said Pepperstone strategist Chris Weston.

Of course, the lack of early movement may be a red herring as the news, perhaps the Oracle/TikTok deal aside, can hardly be perceived as positive, but there has been no risk aversion expressed in FX, through this illiquid period, Weston said.

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