Global equities are losing momentum after a six-day rally that sent stocks to all-time highs.
Across markets, investors dumped expensive technology shares and snapped up small-caps and cyclicals that are primed to benefit from an economic recovery out of the pandemic. Futures on the Nasdaq 100 slumped 1.9%, while contracts on the Russell 2000 rose 2%. American Airlines Group jumped 3% in U.S. pre-market trading.
In Europe, bank stocks were lifted by rising bond yields, with the rate on the 10-year Treasury approaching 0.95%. The pound rose to the highest level in more than two months against the dollar.
“Investors need to diversify toward more cyclical parts of the market that have lagged behind in 2020, and away from big tech and the primary stay-at-home beneficiaries,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. The next leg up in stocks will be driven by more freedom of movement and “an end to U.S. political uncertainty” after the election.
After a searing rally that sent global equities to an all-time high, it’s no wonder that investors are taking a breather to reassess valuations and the economic outlook ahead. While Pfizer Inc.’s vaccine progress and the end of U.S. elections have ushered in a wave of optimism, there are still hard questions about production and transportation of the shot and the fate of another U.S. economic stimulus package.
Separate from the Pfizer trial, an antibody therapy from Eli Lilly & Co. was granted emergency-use authorization in the U.S. But the final-stage trial of a frontrunner Chinese vaccine candidate was halted in Brazil due to a serious adverse event. Expertscautioned questions remain to be answered before an inoculation can be rolled out.
Surging coronavirus cases and legal challenges to the U.S. election outcome also weighed on sentiment. The U.S. surpassed 10 million Covid-19 cases on Monday and appeared poised to hit record hospitalizations later this week.
Elsewhere, Beijing on Tuesday unveiled regulations to root outmonopolistic practices in the internet industry, helping drive down shares of gaming-to-payment giant Tencent Holdings Ltd. and e-commerce titan Alibaba Group Holding Ltd.
These are some key events coming up:
- Alibaba holds its annual Singles’ Day on Wednesday, an online global shopping phenomenon that had $38 billion of sales last year
- European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Federal Reserve Chair Jerome Powell are among the speakers Thursday at an online ECB Forum entitled “Central Banks in a Shifting World”
- Finance ministers and central bankers from the Group of 20 hold an extraordinary meeting Friday to discuss bolder action to help poor nations struggling to repay their debts.
These are some of the main moves in markets:
Stocks
- The Stoxx Europe 600 Index increased 0.6% as of 11:25 a.m. London time.
- Futures on the S&P 500 Index dipped 0.4%.
- Nasdaq 100 Index futures declined 1.9%.
- The MSCI Asia Pacific Index climbed 0.5%.
Currencies
- The Bloomberg Dollar Spot Index was little changed.
- The British pound gained 0.7% to $1.3261.
- The Japanese yen strengthened 0.1% to 105.31 per dollar.
- The Mexican peso weakened 0.1% to 20.3596 per dollar.
Bonds
- The yield on 10-year Treasuries gained two basis points to 0.94%.
- Germany’s 10-year yield climbed one basis point to -0.50%.
- Britain’s 10-year yield rose one basis point to 0.38%.
- Australia’s 10-year yield increased 15 basis points to 0.925%.
Commodities
- West Texas Intermediate crude jumped 0.9% to $40.64 a barrel.
- Gold strengthened 0.7% to $1,876.28 an ounce.
- LME aluminum rose 0.6% to $1,904 per metric ton.
- Iron ore increased 0.8% to $118.99 per metric ton.
— With assistance by Cormac Mullen, and Andreea Papuc
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