Global stock markets unnerved by fears over growth

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Equities updates

Global stocks are poised to record their worst week since February as fears of Covid-19 denting economic recovery and the US soon tapering its domestic stimulus package weighed heavily on sentiment.

The FTSE All-World index has fallen 2 per cent over a week in which China has toughened data privacy rules on its fast-growing technology stocks and countries such as Australia and New Zealand have implemented sudden lockdown measures.

In response investors have turned to haven assets such as the dollar, while selling commodities and stocks in consumer goods. The US dollar index, which measures the greenback against other big currencies, reached its highest point since early November. Brent crude oil, the global benchmark, has fallen nearly 7 per cent over the week on concern that demand will be curbed.

“Some time ago the planets all started aligning — we had very strong economic momentum worldwide, expectations that central banks wouldn’t move for a long time, and strong [equity] valuations,” said Olivier Marciot, senior portfolio manager at Unigestion, the asset manager. “Step by step the planets have dealigned, creating stress in the market.”

Equity benchmarks recouped some losses on Friday. In the US the S&P 500 was trading up 0.6 per cent while the tech-focused Nasdaq Composite rose 0.7 per cent.

Column chart of FTSE All World Index weekly performance (%) showing Global stocks on pace for worst week since February

In Europe stocks rallied at close of day. European benchmark Stoxx 600 was up 0.3 per cent as investors turned away from consumer goods stocks such as Burberry, LVMH and Moncler, which were among those hardest hit. Share prices also dropped for miners such as Anglo American, Glencore and Rio Tinto. The FTSE 100 closed up 0.4 per cent. The Cac 40 in Paris rose 0.3 per cent while Frankfurt’s Dax 30 rose 0.2 per cent.

“Covid, growth and policy worries are resurfacing, just when the positive catalyst from strong earnings is behind us and technicals are weak,” said Emmanuel Cau, a European equity strategist at Barclays. “This should continue to feed the ‘buy the dip’ mentality, although investors may stay on a wait-and-see mode for now.”

Asian stocks, which began the week with a sell-off on the back of weak data out of China, looked set to end the week under further pressure. The MSCI index for Asia Pacific markets was down 1.9 per cent.

The impact of China’s new data privacy law, due to come into effect on November 1, weighed heavily on sentiment across the region. The Hang Seng Tech index of China’s largest internet and ecommerce stocks, including Meituan, Tencent and Alibaba, fell 2.5 per cent.

Tencent’s value has dropped by a little over 12 per cent this month, while Alibaba is down 14.1 per cent in the month to date.

Investors also turned to haven debt assets such as US and German sovereign debt this week, although they were little changed on Friday. The yield on the 10-year Treasury rose by 0.01 percentage points to 1.2533 per cent while the yield on German 10-year Bunds was up 0.001 percentage points to minus 0.496 per cent. Yields fall when prices rise.

Oil fell in the early afternoon, with Brent crude down 0.8 per cent at $65.90, about $10 below the heights it hit last month, as the Covid variant affects demand.

Investors continued to move into safe haven assets such as gold, which was the only major commodity that rose on Friday morning. The US dollar was almost flat against the pound, sliding 0.2 per cent against it to $1.3617. It was trading flat against the euro at $1.1676.

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