Date: 25 January 2021
Author(s): Matt Schuffham
Volatile markets saw global stocks lagging and the dollar advancing on Monday, with sentiment weighed down by increasing COVID-19 cases, vaccine supplies delays and uncertainty over a $1.9 trillion U.S. stimulus plan.
In recent days, equity markets have scaled record highs, on bets vaccines will see reduced infection rates worldwide, and on a stronger U.S. economic recover under President Joe Biden.
However, investors are wary about towering valuations amid questions over the efficacy of the vaccines in curbing the pandemic and as U.S. lawmakers continue to debate a coronavirus aid package.
“The risk for these markets is that, after a bumper couple of months, investors may start to wonder whether they’re looking a little frothy,” said Craig Erlam, senior market analyst at OANDA Europe.
U.S. stocks played a mixed tune to that. The Nasdaq index hit a record high on hopes of bumper earnings later this week from mega-cap technology companies but the Dow Jones Industrial Average index struggled to keep pace.
The Dow Jones Industrial Average fell 36.98 points (0.12%) to 30,960; the S&P 500 gained 13.89 points (0.36%) to 3,855.36; and the Nasdaq Composite added 92.93 points (0.69%) to close at 13,635.99.
Shares on the European counterpart closed at two-week lows as a decline in German business morale highlighted the damage from tighter COVID-19 restrictions.
The pan-European STOXX 600 index reversed early gains and closed 0.8% lower. The German DAX fell 1.7%, France CAC 40 dropped 1.6% and the UK’s FTSE 100 declined 0.8%.
The MSCI world equity index, which tracks shares in 49 nations, edged up 1.46 points or 0.2% to 668.15.
All attention was peeled to Washington, D.C., as U.S. lawmakers agreed that getting COVID-19 vaccines to Americans should be a priority even as they argued bitterly over the size of the pandemic relief package.
Financial markets have been eyeing a massive package, though disagreements have meant months of indecision in a country suffering more than 175,000 COVID-19 cases a day and with millions out of work.
“The immediate question now is when stimulus aid will be approved and how much?” asked MAI Capital Management chief equity strategist Christopher Grisanti.
The dollar grew to a near one-week high against a basket of currencies, as volatility in stock markets around the globe sapped investors’ appetite for riskier currencies.
The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.12 points or 0.1%, to 90.358. The euro was last down 0.3% at $1.2140.
Gold prices had reduced gains on Monday as the dollar edged higher. Spot gold prices rose $2.7261 (0.2%) to $1,855.28 an ounce. U.S. gold futures settled 0.1% lower at $1,855.20 per ounce. \
As global COVID-19 cases inched towards 100 million, with more than 2 million deaths, investors digested mixed news on the progress of vaccine roll-outs.
Moderna Inc said it believes its COVID-19 vaccine protects against new variants found in Britain and South Africa. Moderna shares rose 10.3%.
AstraZeneca is not doing enough to try to resolve a dispute over delayed COVID-19 vaccine deliveries to the European Union, the bloc’s top health official said, as news emerged the drugmaker is also facing supply problems elsewhere.
U.S. investors were also anticipating a busy earnings week, with tech giants like Apple Inc, Facebook Inc, Tesla Inc and Microsoft Corp all due to report their earnings results.
Sentiment in Asia was boosted by a report that China had surpassed the United States as the largest recipient of foreign direct investment in 2020, with $163 billion in inflows.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 9.21 points or 1.3%.
In the commodity markets, Brent crude settled at $55.88 a barrel, an increase of 47 cents or 0.9%. U.S. crude ended 50 cents (1%) higher at $52.77 a barrel.
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