LONDON (Reuters) – Europe’s stock markets held their own on Wednesday after doubts arose over fresh US stimulus, while it was formed after another wild day for gold and silver and Turkey’s restless lira.
FILE PHOTO: The London Stock Exchange Group’s offices are located in the City of London, UK, December 29, 2017. REUTERS / Toby Melville
A lively start of European trade saw sterling shoulder on news that Britain had seen is the worst economic quarter on record thanks to COVID-19. Gold soared nearly 4% after its biggest fall in seven years [GOL/] and German Bund yields hit a two-week high amid a stream of global debt spending. [GVD/EUR]
Turkey’s volatile lira rose another 1.5% when concerns about its economic health and policies resurfaced, while the New Zealand dollar fell 0.4% after its central bank signaled it would remain very supportive.
Mixed sentiment had dragged on Asian stocks as sniping continued between China and the United States. Beijing had also reported faster weaker-than-expected borrowing, while the U.S. Senate majority leader described overnight stimulus talks as “a bit of a stalemate.”
“The bias at the moment is likely to eliminate the S&P 500 and the risk to disappear overall,” said Strateg Generist strategist Kit Juckes.
“What happens next probably depends on what happens in the US stock markets (which are stimulus-oriented) … That may be the deciding factor for short-term sentiment.”
On Wall Street on Tuesday, the S&P 500 snapped up a seven-day winning streak after coming within reach of its all-time peak hit in February just before the global outbreak of COVID-19. [.N]
With the exclusion of a two-part deal on stimulus, the U.S. economy could be left behind with measures U.S. President Donald Trump called Saturday through executive orders to bypass Congress.
“We have enormous ambiguity. It seems that it will be harder for both sides to make compromises, because the elections are approaching … Trump’s proposals would be smaller than markets had expected. The question is whether they are also viable, ”said Junpei Tanaka, strategist at Pictet.
U.S. election campaigns are set to pick up steam after Democratic presidential candidate Joe Biden selected Senator Kamala Harris as his running mate.
The yield of 10-year U.S. treasuries climbed a few basis points to 0.67% in Europe to stay at a one-month high.
The 10-year (+ 6.6bps) and 30-year (+ 7.5bps) returns saw their biggest gains in more than a month on Tuesday, while the 2s10s curve climbed 4.6 basis points, the most since June 5th. The gap between U.S. biennial and 10-year Treasury yields is a metric that is closely watched for signs of a decline.
On top of hedge sales ahead of the biggest-ever-10-year note auction later in the day, bonds have also lost some of their allure of safe haven on growing hopes of faxing against COVID. 19.
Russian President Vladimir Putin said on Tuesday that his country was the first to give regulatory approval to a COVID-19 vaccine after less than two months of human testing.
While Moscow’s decision raises eyebrows, the news raises hopes that some of the faxes currently under development would be available sooner than expected.
Oil prices grew to greater-than-expected drop in U.S. inventories, with Brent up 0.6% at $ 44.75 a barrel. US crude was up 0.5% at $ 4.80.
However, the most dramatic movement took place in precious metals.
Gold swung from 2% down to 1.7% up at $ 1,935 per ounce, a day after its biggest daily fall in seven years. Silver was even wilder, growing nearly 4% in Europe to a 15% high on Tuesday. [GOL/R]
Report by Marc Jones; edited by Philippa Fletcher
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