LONDON / SINGAPORE (Reuters) – Global stocks fell on Tuesday, oil sank and a security offer supported the dollar as tensions between China and the United States and new coronavirus restrictions in California kept a check on optimism in investors with the earnings season underway.
FILE PHOTO: A street cleaning agent passes by the London Stock Exchange Group building in the City of London financial district, as British stocks fall as investors fear the coronavirus outbreak could stall the economy. global, in London, Great Britain, on March 9, 2020. REUTERS / Toby Melville
The MSCI World Index of All Countries fell 0.4%, after hitting a 20-week high on Monday. The pan-European STOXX 600 opened 1.5% lower and was headed for its worst day in 14 sessions after technology stocks fell 3.4%. This followed a crash a day earlier on the tech-laden Nasdaq.
One of the winners was German food kit delivery company Hellofresh, which added 4.3% as it increased its forecast for full-year revenue.
MSCI’s broader Asia-Pacific index of stocks outside Japan fell 0.9%. Chinese stocks fell despite better-than-expected trade figures. The US dollar was marginally firmed.
The measures followed a massive sale on Wall Street after California Governor Gavin Newsom ordered the closure of bars, restaurants and movie theaters to cease indoor operations.
S&P 500 futures were 0.5% stronger after the index lost 0.9% on Monday.
Tension grew between Washington and Beijing after the United States rejected China’s controversial claims to offshore resources in most of the South China Sea.
The Trump Administration also plans to rule out a 2013 audit deal that could presage a broader crackdown on Chinese companies listed in the U.S.
“It is not just the pace that is improving, but the appearance of so many areas that are being drawn into the dispute,” said Vishnu Varathan, chief economist at Mizuho Bank in Singapore.
“The last time was really about the bottom line,” he said, adding that what had been primarily a trade dispute is now much broader, making resolution less likely and next steps less predictable.
The Shanghai index fell 0.7% despite official figures showing that Chinese exports and imports exceeded expectations in June, while China continued to buy significant quantities of products, including iron ore.
The return of restrictions in California also has markets on the verge of whether the coronavirus can cause further economic harm. Global infections have increased by one million in five days and exceed 13 million.
Chart: 2020 global earnings forecast here
ALL ABOUT 2021
Oil prices, an indicator of global energy consumption and growth expectations, reflected concerns. US crude futures fell 1.5% to $ 39.52 a barrel and Brent futures fell 1.3% to $ 42.16 a barrel.
Investors sought the security of eurozone government bonds. Most yields were approximately 2-3 basis points lower, with the 10-year Bund yield of Germany, the region’s benchmark, falling 2.5 bp to -0.43%.
There are also signs of a disruption to the steady flow of better-than-expected economic data. On Tuesday, data showed Singapore went into recession last month, with an economy that contracted 41.2% in the quarter, worse than the 37.4% that analysts had forecast.
Currency markets doubled the dollar in a narrow range. Against a basket of currencies, the dollar index last rose 0.1% to 96,662. The euro was down 0.1% against the dollar at $ 1.1331.
Currencies exposed to global trade sentiment like the Australian dollar and China’s offshore yuan fell.
The focus later shifts to US earnings, with JP Morgan, Citigroup, Wells Fargo, and Delta Air Lines due to report Tuesday to a market already looking to 2021 and beyond.
“It really is about 2021-2020 is over,” said fund manager Hugh Dive, chief investment officer at Atlas Funds Management in Sydney, where the earnings season begins appropriately next month.
“The outlook statements are what the market will look at,” he said. “If a company surprises to the upside with its 2020 earnings but has shaky comments by 2021 … they will not be rewarded for that.”
Spot gold fell 0.2% to $ 1,798.79 per ounce as the dollar strengthened.
Chart: world exchange rates in 2020 here
Additional reports by Pete Schroeder in Washington and Paulina Duran in Syndey; Editing by Timothy Heritage
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