LONDON: Global shares edged higher and the dollar slipped on Wednesday as weak U.S. retail sales and a surge of new coronavirus cases tempered market euphoria after recent COVID-19 vaccine breakthroughs.
The MSCI World index was up 0.1% at 1013 GMT, just shy of the previous session’s record high.
After opening lower, European shares crawled back into the black, with the STOXX 600 index up 0.3%, tracking overnight gains in Asia where China stimulus hopes helped MSCI’s broadest regional gauge rise 0.7%.
U.S. stock futures also pointed to firmer open on Wall Street, up 0.2%, after soft U.S. retail sales data, a rise in COVID-19 cases and uncertainty over fresh stimulus measures in the world’s largest economy had sapped sentiment.
While the release of two successful coronavirus vaccine trial data over the last week had buoyed markets, the still-high infection rate globally had acted to trim gains, said Jane Shoemake, London-based fund manager at Janus Henderson.
“People can see light at the end of the tunnel now and the markets clearly responded to that, but it’s not going to go up in a straight line because we’ve still got to get through the winter… (and) that is going to continue to temper some of the exuberance people feel.”
Concern about the still-high infection rate in the United States acted to crimp dollar demand, with the greenback sliding against a basket of currencies to its lowest since Nov. 9.
That had followed weak retail sales data overnight and comes as hopes for fresh U.S. stimulus remain hampered by political gridlock, pinning near-term hopes on action from the U.S. central bank.
Strong corporate earnings in the third quarter also continued to underpin the positive stock market sentiment, said analysts at Barclays, with firms “confident on the outlook and in control of costs”, they said in a note to clients.
“This reinforces the case for a strong earnings rebound and pick-up in corporate activity in 2021, as the cyclical recovery unfolds.”
Cormac Weldon, Head of U.S. Equities at UK asset manager Artemis said while the overall picture for investors was brighter, the recovery was likely to be uneven.
“Low inventories and the need to manufacture and distribute goods are likely to be the first drivers of the recovery, with the re-emergence of consumer demand adding a powerful second phase.”
With stocks still well supported, other risk markets also took heart, with U.S. crude futures and Brent crude futures both up just over 1%, bolstered by hopes OPEC will delay a planned increase in production.
Safe haven gold, meanwhile, was down 0.3% at $1,872.6 an ounce, with U.S. gold futures also slightly lower.
In Europe’s debt markets, Germany saw its benchmark 10-year government bond yield fall to its lowest since Pfizer announced its COVID-19 vaccine update a week and a half ago.
“Yields continue to grind lower as more warning signs flash about the near-term outlook,” said Benjamin Schroeder, senior rates strategist at ING.
“Euro zone spreads appear to have eyes only for QE (quantitative easing), shrugging off volatility and EU setbacks,” he said, referring to news this week that Hungary and Poland have blocked the adoption of the 2021-2027 budget and recovery fund by European Union governments.
(Editing by Kim Coghill, Larry King and Toby Chopra)
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