LONDON (Reuters) – European equities rose Wednesday as a record high for U.S. equities outweighed concerns about a resurgence in coronavirus cases that could undermine an emerging recovery.
FILE PHOTO: The London Stock Exchange Group’s offices are on display in the City of London, UK, 29 December 2017. REUTERS / Toby Melville
The broad Euro STOXX 600 gained 0.1% in choppy trading, with indices from Frankfurt to London making slim profits.
Among the bright spots were shares for travel and entertainment, with British Airways owner up 3.7% on a UK plan using COVID-19 testing at London Heathrow Airport to help reduce the number of days that passengers are quarantined have to spend.
But oil and gas, utilities and shares in mining roads, with BP and Royal Dutch Shell losing about 0.6% as crude prices fell on concerns about demand and growing COVID-19 cases in Europe.
Early movements in Europe mirrored a volatile session for Asian equities, where losses in Chinese and Hong Kong equities erased an earlier push to a seven-month high.
MSCI’s broadest index of shares in Asia-Pacific outside Japan fell 0.2%, after initial support of a charge of an S&P 500 to a record high driven by looser policies and charging of tech shares.
Wall Street futures pointed to slim gains.
Strategist said the sluggish performance in Europe and Asia was symptomatic of increasing focus for investors: where to put money before a coronavirus vaccine is found.
Money has grown in U.S. growth stocks – the tech giants and retail titans who have benefited most from the recovery – as investors worry that in the absence of a vaccine a rise in coronavirus cases will “share” value can damage.
“It’s the biggest dilemma there is at the moment,” said Mike Bell, global market strategist, at JP Morgan Asset Management.
“If you get a fax, you’ll see a big rotation from the stocks that have done very well this year – the growth stocks, the tech stocks – to the stored value stocks – the hotels, the airlines. ”
During the day, U.S. stocks set records as investors gravitated toward the winning homeowners from COVID-19 lockdowns such as Amazon and Netflix.
The benchmark S&P 500 went all the way through February, hitting stocks just before the start of the COVID-19 pandemic on March 23rd.
It has risen about 55% since those cuts, driven by monetary stimulus packages, even as alarm bells ring over the underlying health of the economy and negotiations on fiscal stimulus are running in Washington.
DOLLAR FLOORED
The US Federal Reserve’s intervention in financial markets to maintain liquidity has pushed risky assets to great heights and reduced the demand for safe havens, threatening the US dollar.
In early trading, the greenback climbed away from a 27-month low a day earlier, gaining 0.1% against a currency rate to 92,256.
“The U.S. dollar left the building last night,” said Jeffrey Halley, senior market analyst at Oanda, citing the prospect of further redemption by the Federal Reserve as the trigger.
Financial markets have “realized that the US government can spend as much debt as they want”.
Markets are also paying close attention to minutes from the Fed’s recent meeting, later in the day, for hints on what the Fed could announce in September.
Some investors speculate that the Fed will adopt an average inflation target, which sought to push inflation above 2% for a while.
In commodities, Brent crude futures fell 45 cents, or 0.6%, to $ 45.19 per barrel, over concerns that demand for U.S. fuel may not return as quickly as expected amid stagnant talks over an economic stimulus package. [O/R]
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Report by Tom Wilson; Edited by Alison Williams
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