LONDON (Reuters) - A fresh coronavirus outbreak in Beijing and rising U.S. infection numbers are continuing to make markets jittery, depressing stocks, oil and emerging markets, while spurring safe haven bids on fixed income and the U.S dollar.
Beijing recorded almost 80 new coronavirus infections over the weekend after weeks of no new cases. That’s sparked concerns about a second coronavirus wave, with authorities reinstating tough measures.
Meanwhile there are record numbers of new coronavirus cases and hospitalisations in a number of U.S. states, including Florida and Texas - fresh proof that in many countries the first wave is far from over as they push ahead with reopening economies.
And Chinese data this morning has done little to calm nerves. Industrial production did rise 4.4% in May, but fell short of expectations, while retail sales suffered a bigger-than-expected 2.8% drop. It’s evidence that the world’s second largest economy is still struggling to get back on track.
The sombre mood pushed the dollar index near a fresh 10-day high for its third day of gains, while risk-sensitive currencies such as the Australian and New Zealand dollars and Norwegian and Swedish crowns suffered, falling to their lowest in nearly two weeks. The euro too slipped versus the dollar.
Investors are seeking shelter in safe havens such as German and U.S. bonds, pushing yields on 30-year Treasuries to new three-week lows.
The picture is looking bleak for equities today with stocks in Europe dropping 2.2% at open, following Asia's lead lower. Bourses in France and Spain have suffered the heftiest losses, both dropping nearly 3% at open. U.S. futures point to losses for Wall Street later in the day.
Global stocks are down 1%, having sustained losses in four out of the last five sessions and sliding 6% from the peak hit last week.
On the corporate front, there are signs companies are trying to return to some kind of normalcy. EasyJet resumes flying for the first time since March 30, with COVID-19 measures in place while Volkswagen will begin sending workers back to its Mexican plant on Tuesday.
Earnings continue to show the pandemic's impact on the bottom line - positive or negative. Swedish retailer H&M's March-May sales tumbled 50%, though that was slightly less than expected. Swiss sensor maker Sensirion lifted 2020 outlook thanks to a spike in demand for ventilator sensors.
AstraZeneca has signed a contract with European governments to supply its potential vaccine against the coronavirus. Its shares are nevertheless down 0.4%. Oil major BP will incur an up to $17.5 billion writedown in the value of its assets after lowering its long-term oil and gas price outlook.
In the M&A world, Cineworld has scrapped its deal to buy Cineplex; while Metro Bank is in exclusive talks to buy peer-to-peer lender RateSetter. Italy's BPER Banca has approved a revised deal with Intesa Sanpaolo to address antitrust issues in Intesa's takeover bid for UBI Banca.
The China fears pushed emerging equities towards their worst day in almost a month, as well as their first three-day run of losses since mid-March. MSCI’s EM index is down 1.8%, bringing the total decline over the past three days to 4.5%.
South Korean stocks are leading the way with a plunge of 4.8% while the Philippines have dropped 4% as the easing of lockdown restrictions has brought a fresh wave of infections.
MSCI’s EM currency index is also down for a third day – South Africa’s rand slipped 1.5% this morning while Mexico’s Peso, a weather vane for U.S. sentiment, has dropped 2.2%.
In more proof of the kind of impact the pandemic is having on developing economies, Indonesia said its exports and imports plunged the most since 2009 in May; down 29% and 42% year-on-year respectively.
— A look at the day ahead from chief emerging markets correspondent Karin Strohecker. The views expressed are her own —