World shares weaker as virus fears overshadow US stimulus

AP – Global shares retreated yesterday as worsening coronavirus outbreaks overshadowed news that United States (US) lawmakers finally set a deal on more support for American families and businesses.

Markets fell in Paris, London, Frankfurt and Tokyo but rose in Shanghai.

Passage by the Congress of the nearly USD1 trillion COVID-19 economic relief package was expected yesterday. However, a resurgence of virus outbreaks around the globe dented optimism that vaccines can bring a swift end to the pandemic.

Most investors already factored in expectations for the fresh stimulus, Jingyi Pan of IG said in a commentary.

“The tentative accord on the approximate USD900 billion coronavirus stimulus deal, having been the talk of the town for weeks, brought forth little fresh enthusiasm for markets,” Pan said.

Germany’s DAX sank two per cent to 13,357.27 and the CAC 40 in Paris shed 2.6 per cent to 5,387.12. In Britain, where a strain of the coronavirus that is thought to be more easily transmissible has been spreading, the FTSE 100 gave up 1.4 per cent to 6,436.30.

US futures also weakened, with the contract for the S&P 500 down 0.6 per cent. The future for the Dow industrials dropped 0.5 per cent.

A woman passes a bank’s electronic board showing the Hong Kong share index. PHOTO: AP

The gloom over the outlook has deepened, as several European Union (EU) nations banned flights from the United Kingdom (UK) and others considered similar precautions aimed at preventing the new strain of the virus from gaining a strong foothold on the continent.

The British pound, sometimes called the pound sterling, fell 1.8 per cent against the dollar, to USD1.3274, down from USD1.3522 on Friday.

“Combined with European border closures and the UK Health Secretary using phrases such as ‘out of control’ to describe the new strain, Sterling is, unsurprisingly, under pressure today,” Jeffrey Halley of Oanda said in a commentary.

In Asia, flaring COVID-19 outbreaks led authorities to impose lockdowns or other restrictions in Australia and Thailand.

Tokyo’s Nikkei 225 index lost 0.2 per cent to 26,714.42, regaining some of its earlier losses after the Cabinet approved a record annual budget of JPY106.6 trillion for the coming fiscal year, which begins on April 1.

The budget, expected to gain lawmakers’ approval next month, includes a ninth straight increase in defence outlays as Japan develops longer-range cruise missiles and stealth fighters. It also includes extra funding to fight the pandemic.

In Hong Kong the Hang Seng declined 0.7 per cent to 26,306.68. Australia’s S&P/ASX 200 shed 0.1 per cent to 6,669.90, while India’s Sensex dropped 1.8 per cent to 46,565.94.

South Korea’s Kospi recovered from early losses, gaining 0.2 per cent to 2,778.65. The Shanghai Composite index gained 0.8 per cent to 3,420.57.

Thailand’s benchmark SET index lost 3.2 per cent as a fresh outbreak of coronavirus cases clustered around a seafood market near Bangkok shook confidence in the country’s pandemic precautions.

The US stimulus agreement is includes temporary USD300 per week supplemental jobless benefits and USD600 direct stimulus payments to most Americans, along with a fresh round of subsidies for hard-hit businesses and funding for schools, healthcare providers, and renters facing eviction.

The final agreement was reached after a breakthrough over Federal Reserve emergency powers was resolved by the Senate’s top Democrat and a senior conservative Republican.

Wall Street retreated on Friday, with the S&P 500 losing 0.4 per cent a day after it and other major indexes breached record highs.

The pandemic’s chokehold on the economy worsened, with reports showing growing numbers of workers applying for jobless benefits and weaker than expected sales for retailers.

Wall Street’s hope is that the stimulus for the economy might help carry it through a tough winter, until the widespread rollout of COVID-19 vaccines might bring relief.

But it will be months before most people can get the shots, and the pandemic is likely to do even more damage in the interim.

In the bond market, the yield on the 10-year Treasury slipped to 0.91 per cent from 0.94 per cent on Friday.

US benchmark crude oil lost USD1.69 to USD47.55 per barrel in electronic trading on the New York Mercantile Exchange. It gained 70 cents to USD49.24 per barrel on Friday.

Brent crude, the international standard, declined USD1.80 to USD50.46 per barrel.

The dollar rose to JPY103.55 from JPY103.32 on Friday. The dollar’s prolonged weakness against the yen prompted Prime Minister Yoshihide Suga to warn that the government did not want to see the dollar-yen rate fall below JPY100, the financial newspaper Nikkei reported.