Stocks stall on virus spikes while safe haven gold climbs

July 08, 2020: Europe's stock markets slipped for a second straight session on Wednesday, with concerns about fresh spikes in coronavirus infections helping haven investment gold above $1,800 an ounce for the first time since 2011.

The eurozone's key indices were down by a percent or more at the close, with London doing a little better.

On Wall Street the Dow Jones was unchanged in the late New York morning.

Equity markets were in “a struggle for any meaningful direction”, said Craig Erlam, an analyst with OANDA.

“The rally has clearly lost momentum as the grand reopening runs into the kind of challenges we all feared,” he said.

A string of positive indicators, from China to the US in recent weeks — as well as hopes for a vaccine and the easing of lockdowns around the world — had fuelled a global stock markets rally that had lifted equities out of their March depths.

But while hopes that the world economy will recover remained intact, the ongoing spread of coronavirus has seen indices run out of steam over the past two days.

That helped gold climb to $1,804.31 an ounce Wednesday on the London Bullion Market, the highest level in 8.5 years, as recent dollar weakness also made the metal priced in the US unit attractive to investors.

“It is little surprise that the original safe haven is continuing its rally,” said Carlo Alberto De Casa, chief analyst at ActivTrades.

– 'Want to be covered' –

“Investors are still buying stocks but it seems they want to be covered in case of any market correction.”

With gold seen as a good store of value, analyst Neil Wilson said the metal was also winning support thanks to fears of high inflation caused by central bank stimulus to prop up the global economy.

“The gold bull thesis rests not only on the requirement for safe assets given the economic uncertainty, but also longer term on fears of a surge in inflation caused by the massive increase in the money supply,” he said in a client note.

Adding to market unease were ongoing tensions between China, the US and several other nations over Beijing's imposition of a security law in Hong Kong.

The pound, meanwhile, got a small boost against the dollar after Britain's finance minister announced a package to help the economy recover from the coronavirus fallout.

The measures “will pack a sizeable punch and support higher private spending with significant implications for hard hit sectors such as construction, housing and hospitality”, said Kallum Pickering, an analyst with Berenberg.

– Key figures around 1540 GMT –

  • London – FTSE 100: DOWN 0.6 percent at 6,156.16 points (close)
  • Frankfurt – DAX 30: DOWN 1.0 percent at 12,494.81 (close)
  • Paris – CAC 40: DOWN 1.2 percent at 4,981.13 (close)
  • EURO STOXX 50: DOWN 1.1 percent at 3,286.09
  • New York – Dow: FLAT at 25,898.41
  • Tokyo – Nikkei 225: DOWN 0.8 percent at 22,438.65 (close)
  • Hong Kong – Hang Seng: UP 0.6 percent at 26,129.18 (close)
  • Shanghai – Composite: UP 1.7 percent at 3,403.44 (close)
  • West Texas Intermediate: DOWN 0.3 percent at $40.49 per barrel
  • Brent North Sea crude: DOWN 0.2 percent at $42.99
  • Euro/dollar: UP at $1.1327 from $1.1271 at 2040 GMT
  • Dollar/yen: DOWN at 107.46 yen from 107.54 yen
  • Pound/dollar: UP at $1.2587 from $1.2541
  • Euro/pound: UP at 90.00 pence from 89.87 pence


Posted on: 2020-07-08T23:55:00+05:00