HONG KONG (AFP) – Stock markets were mixed yesterday, with gainers supported by bargain-buying after the previous day’s sell-off, with investors growing increasingly concerned about new lockdown measures in Europe as a second wave of coronavirus takes hold.
Traders were also keeping tabs on developments in Washington as lawmakers struggle to find agreement on a new stimulus for the beleaguered United States (US) economy, with a disappointing jobs report highlighting the need for action.
But analysts suggested that with Democrats and Joe Biden enjoying big opinion poll leads, expectations for a clean sweep of Congress and the White House in the November 3 elections is lending buoyancy to equities on hopes they will pass a much bigger rescue package.
All three main indexes on Wall Street finished in the red for a third day, hit by unsettling infection rates in the US and particularly in Europe that many fear could see the return of economically painful restrictions similar to those imposed earlier this year.
London faces more stringent restrictions as cases rise, while Paris and eight other French cities will be put under partial curfew for as long as six weeks.
Germany also ramped up measures, while the European Union’s (EU) disease control agency labelled more than half of the bloc’s member states as red zones in a new map to guide countries’ decisions on travel restrictions.
“We need to take into account the tremendous rally we’ve had over the past five months so some consolidation is certainly warranted,” Jim McDonald at Northern Trust told Bloomberg TV.
“The new risk emerging on the horizon is the increasing cases of COVID-19 that are sweeping across Europe and increasing across the US.”
Hong Kong led gains, jumping 0.9 per cent after a drop of more than two per cent on Thursday, while Shanghai, Mumbai and Singapore were also in positive territory. However, Tokyo, Sydney, Seoul, Manila, Jakarta and Wellington were all down. European markets opened with big rises after Thursday’s steep losses fuelled by concerns over the surging virus.
The slide back into containment measures has increased the need for further government help, though the odds on anything being agreed in Washington before the election are lengthening each day.
Adding to the gloom was a report on Thursday showing new applications for jobless benefits hit a seven-week high last week.
With polling showing him well behind in the White House race, US President Donald Trump said he was open to a bigger stimulus than the USD1.8 trillion offered last week.
“I would,” he told Fox Business when asked if he would hike his proposal. “Absolutely, I would. I would say more. I would go higher. Go big or go home, I said it yesterday.”
However, while the president is willing to move towards the Democrats’ USD2.2 trillion plan, House Speaker Nancy Pelosi was not happy with the detail and Republican Senate Majority Leader Mitch McConnell said he was unwilling to agree to such big spending.
And Treasury Secretary Steven Mnuchin said a deal is unlikely before the election.
“Of course, the markets’ on-again off-again love affair with an impending stimulus torrent masks the fact that investor uncertainty is bristling ahead of an expected choppy period in terms of headline risk,” said Axi’s Stephen Innes.
Key issues, he said, included “Brexit, the US election, and perhaps the most horrifying troubles of all, the second wave of the coronavirus” that could lead to more lockdowns.
However, he added that the eventual passage of a new deal would likely fuel a surge on markets.
The first stimulus passed earlier this year, combined with huge central bank support, has been credited with helping to send equities soaring from their March troughs.