November 19, 2020: Stocks pulled back Thursday as a global rally fuelled by vaccine optimism petered out in the face of surging infections that are forcing fresh lockdowns and threatening to shock the global economy again.
While the broad consensus is that 2021 will see a healthy recovery across the world as people are gradually inoculated, traders are focusing on the immediate crisis as the US and Europe suffer a new wave of the killer disease.
“After the soaraway gains of the past two weeks, equities now look much more richly valued, and thus vulnerable to an outbreak of bad news,” said Chris Beauchamp, chief market analyst at IG trading group.
“This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread.
“Even reports of success for AstraZeneca's new vaccine were not enough — the impact of these vaccine announcements having been on a declining trend since the first excitedly received news from Pfizer almost three weeks ago,” Beauchamp added.
World markets have enjoyed an impressive run this month thanks to Joe Biden's US election victory and then news that two vaccine candidates had shown to be more than 90 percent effective in late trials.
The announcements lifted hopes that the planet can begin to get back to some form of normality soon.
However, Wall Street took a decisive turn lower in late trade Wednesday when New York Mayor Bill de Blasio said he would shut schools because of rising infections.
The move indicated that the soaring number of new cases around the US — the country has registered more than 100,000 every day for two weeks — could force lockdowns similar to those that battered the economy earlier this year.
Meanwhile, a rise in new filings for unemployment benefits in the United States also dented sentiment.
The increase to 740,000 new claims reverses a recent decline in the figure and comes as more states restrict the operations of businesses such as restaurants and gyms.
Key European economies including France, Germany and Britain have already imposed new or partial lockdowns, while other countries around the world including Japan and South Korea have been forced to take new containment action.
European Central Bank chief Christine Lagarde on Thursday called for the EU's planned coronavirus recovery fund to become available “without delay”, after Poland and Hungary blocked the adoption of the plan.
The appeal came ahead of a videoconference by EU leaders set to be dominated by the budget row, which threatens to hold up the unlocking of badly needed stimulus to cushion the economic hit from the pandemic.
It also comes as Washington has yet to agree on a massive new stimulus package for the United States.
Meanwhile, IMF chief Kristalina Georgieva warned leaders ahead of a G20 summit this week that the global economy faces a hard road back from the Covid-19 downturn.
– Key figures around 1430 GMT –
- London – FTSE 100: DOWN 0.7 percent at 6,338.60 points
- Frankfurt – DAX 30: DOWN 0.7 percent at 13,121.39
- Paris – CAC 40: DOWN 0.5 percent at 5,481.54
- EURO STOXX 50: DOWN 0.7 percent at 3,458.54
- New York – Dow: DOWN 0.5 percent at 29,289.72
- Tokyo – Nikkei 225: DOWN 0.4 percent at 25,634.34 (close)
- Hong Kong – Hang Seng: DOWN 0.7 percent at 26,356.97 (close)
- Shanghai – Composite: UP 0.5 percent at 3,363.09 (close)
- Euro/dollar: DOWN at $1.1824 from $1.1853 at 2150 GMT
- Pound/dollar: DOWN at $1.3209 from $1.3270
- Dollar/yen: UP at 104.06 yen from 103.86 yen
- Euro/pound: UP at 89.55 pence from 89.33 pence
- West Texas Intermediate: DOWN 0.4 percent at $41.67 per barrel
- Brent North Sea crude: DOWN 0.1 percent at $44.28 per barrel