Global Markets: European shares dip on second wave fears

LONDON (Reuters) – European shares fell on Wednesday as countries began to close schools and cancel surgeries on a resurgence of the COVID-19 pandemic, though sterling gained on hopes of further Brexit talks.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 12, 2020. REUTERS/Staff/File photo

The pan-European STOXX 600 slipped, and markets in Frankfurt, London and Paris were down around 0.3% following moves to address rising coronavirus infection rates in Europe. World stocks were flat below recent record highs, and Wall Street futures were also lower.

The losses followed a downbeat Wall Street on Tuesday, after two COVID-19 trials were delayed, and U.S. stimulus hit an impasse.

Markets are grappling with “angst about vaccine/antibody delays, angst about rising covid cases in Europe, stalled U.S. fiscal talks, stalled Brexit trade talks”, said Kit Juckes, macro strategist at Societe Generale.

Moving beyond bar and pub closures, the Czech Republic, which now has Europe’s worst rate per capita, shifted schools to distance learning and hospitals started cutting non-urgent medical procedures to free beds.

Moscow authorities said on Wednesday they would introduce online learning for many students starting on Monday, while Northern Ireland announced schools would close for two weeks.

Banks were in focus on Wall Street, with profits at Bank of America down on higher credit-loss provisions.

The U.S. dollar was steady after its best day in three weeks on Tuesday, when its index against a basket of six major currencies rose 0.5%. The index was last 0.06% lower at 93.48. The euro was barely changed at $1.1741.

Government bonds edged up, with German bund yields, which move inversely to prices, hitting their lowest since May [EUR/GVD]. Gold, another safe haven, gained 0.58%.

Euro zone industrial production data showed the rate of recovery slowed sharply in August, in line with expectations.

Investors are also watching tensions between the European Union and Britain after the EU demanded “substantive” movement on Tuesday on fisheries, dispute settlement and guarantees of fair competition in their talks on a post-Brexit trade deal.

An EU-UK trade deal is difficult but still possible to achieve if the two sides negotiate intensely in the coming weeks, said a person close to the talks on Wednesday.

Sterling reversed earlier losses against the euro and the dollar on the news. EU leaders will hold a summit in Brussels on Thursday and Friday to assess progress.

Oil slipped on concerns that fuel demand will continue to falter as rising coronavirus cases across Europe and in the United States, the world’s biggest oil consumer, impede economic growth. Brent and U.S. crude were at $42.40 and $40.10 a barrel, respectively.

Zambia, one of the world’s largest copper producers, saw its international bonds slump more than three cents on the dollar on fears of an ugly default caused by an escalating row between the government and the country’s private-sector creditors.

TRIALS

Stock market losses began on Wall Street Tuesday when Johnson & Johnson said it was pausing a COVID-19 vaccine trial after a study participant suffered an unexplained illness.

Eli Lilly and Co later said it too had paused the clinical trial of its COVID-19 antibody treatment because of a safety concern, leading the U.S. equity market to deeper losses.

J&J shares lost 2.3% and Eli Lilly closed down nearly 3%.

Hopes for the passage of a new coronavirus relief package also faded as U.S. House Speaker Nancy Pelosi rejected a $1.8 trillion relief proposal from the White House.

“The standstill in negotiations over a new U.S. fiscal package as COVID-19 infections continue to rise globally highlights the importance of political consensus, and here the outcome of the election is likely to prove pivotal,” Unicredit analysts said in a note.

MSCI’s broadest index of Asia-Pacific shares outside of Japan had tracked Wall Street’s losses overnight to end a seven-day rally.

The index was last down 0.11%, having toppled from a two-and-a-half-year high of 588.76 touched on Tuesday. Chinese shares closed down 0.7%.

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