© Reuters. FILE PHOTO: The security guard with a face mask stands near the Bund Financial Bull statue and a screen displaying an image of a medical worker at the Bund in Shanghai2/2
By Wayne Cole
SYDNEY (Reuters) – Asian stocks slipped from six-month spikes on Friday as tensions between China and the United States sharpened what had been an optimistic week, while the euro held close to a 21-month high against the dollar and gold on top of a record.
For once, currencies had dominated trade, as an agreement on a European Union recovery plan brought the euro to its highest level since late 2018. The single currency last held at $ 1.1602 after having risen 1.5% during the week so far.
That was taken as a signal to sell the dollar, which fell 1.4% on the week against a basket of currencies at 94,645 and headed for its fifth consecutive weekly loss.
It also broke the March low of 94,650 to reach depths not visited since late 2018.
“The bearish case for the USD continues to sharpen with a break from the lows of March 94.65 that is likely to mark the start of the next stage,” said Westpac analyst Richard Franulovich.
“Europe has reached an important milestone in its tax deals, the Recovery Fund is equivalent to a European Treasury that will finance EU spending through capital market loans.”
He noted that the dollar faced a major hurdle next week when a Federal Reserve policy meeting was likely to take a very moderate trend as the spread of the coronavirus threatened recovery.
For the stock markets, the mood darkened after Beijing ordered the United States to close its consulate in Chengdu, in retaliation for the order to close its consulate in Houston earlier this week.
The Chinese blue chips fell 3.7% as a result, eliminating a week of profit.
MSCI’s broader index of Asia-Pacific stocks outside Japan lost 1.7%. Tokyo closed for the holidays, but futures were trading 350 points below the last cash close.
E-Mini futures for the S&P 500 fell 0.3%, while EUROSTOXX 50 futures decreased 1.1% and futures 1.0%.
The market’s stubborn optimism about the economic recovery had been questioned Thursday by data showing that the number of Americans applying for unemployment benefits unexpectedly increased last week for the first time in nearly four months.
Analysts said there were some technical reasons for the surprise, but noted that claims were still more than double their worst weekly levels seen during the global financial crisis.
It came as US lawmakers struggled to agree on a new round of stimulus measures before the desperately needed unemployment benefits expire.
All of which was enough for the Dow to end Thursday with a 1.31% drop, while the S&P 500 lost 1.23% and the Nasdaq 2.29%.
The high-flying tech sector lost some altitude after a tech watchdog group reported that Apple Inc (NASDAQ 🙂 is facing consumer protection investigations in several states.
“In a larger picture, this news is probably just a foretaste of what is likely to come after the November US election through intensive ‘Big Tech’ antitrust / antitrust investigations, including Google (NASDAQ 🙂 and Facebook (NASDAQ :), as well as the EU’s orchestrated efforts for a new digital tax regime for the global tech giants, “said Ray Attrill, head of FX strategy at NAB.
BRIGHT GOLD
In bond markets, the ocean of liquidity provided by global central banks keeps prices up, so 10-year US bond yields closed their lowest since mid-April at 0.5774% and the entire curve Performance flattened.
The combination of super loose money and negative real bond yields has polished the appeal of gold, which pays no return but is limited by supply.
The precious metal last had a duration of $ 1,1886 per ounce, having risen 4.3% so far this week to its highest level since September 2011. That placed it at a surprising distance from the all-time high of $ 1,920.
Analysts at RBC Capital Markets noted that holdings of gold-backed exchange-traded products had already reached record highs.
“COVID-19’s level of uncertainty, low and negative real and nominal rates, politics and geopolitics have caused gold prices to rise dramatically and boosted allocations among investors more and more,” they said in a note.
Oil prices were ending the week on a flat note as they failed to hold a five-month high as concerns about global demand offset a weaker US dollar. [O/R]
futures rose 16 cents to $ 43.47 a barrel, while they gained 9 cents to $ 41.16.
