World stocks remained on course for their best month ever on Friday as recent vaccine progress, Joe Biden’s U.S. presidential election win, hopes for further stimulus, a commodity surge and descending dollar all lifted the spirits.
European markets felt a touch of caution as questions emerged over trial data on AstraZeneca’s COVID-19 vaccine and Poland threatened to veto the new EU budget, but that wasn’t enough to derail November’s gains.
German, French, Italian and Spanish stocks all gained and government bond yields stayed low after the European Central Bank reinforced expectations of further stimulus next month and Sweden’s Riksbank made a surprise increase to its quantitative-easing programme.
London’s FTSE was lower all morning amid some last-minute Brexit nerves , but with Wall Street pointing to a post-Thanksgiving rise, MSCI’s main world index was readying for another record high.
“Risk sentiment is in reasonable nick because we’ve got vaccines and easy money,” said Societe Generale strategist Kit Juckes. “That is the underpinning of optimism.”
It wasn’t all good news. Australian shares ended down 0.5% — Treasury Wine Estates was whacked 11.25% as China imposed new tariffs on Australian wine, the latest move in the countries’ long-running trade row.
Chinese shares still rose 0.1% after data there showed industrial profits surged at the fastest pace since early 2017. South Korean stocks and Japan’s Nikkei both rose 0.3%.
British drugmaker AstraZeneca’s coronavirus drug was touted as a “vaccine for the world” due to its low cost, but the efficacy of the vaccine is now facing more scrutiny, which experts say could delay its approval.
Several scientists have raised doubts about the robustness of results showing the shot was 90% effective in a sub-group of trial participants who, by error initially, received a half dose followed by a full dose.
“With global (coronavirus) case numbers having now topped 60 million … there is certainly some rough terrain ahead for the global recovery, and that can create economic scarring,” analysts at ANZ Bank wrote in a memo.
On Brexit, the European Union and Britain said substantial differences remained over a Brexit trade deal, as the EU chief negotiator prepared to travel to London in a last-ditch attempt to avoid a tumultuous finale to the five-year crisis.
Sterling, which has climbed 4% against the dollar this month and the same against the euro since September, trimmed 0.3% against both to sit at $1.3329 and 89.50 pence pre euro.
“Clearly, there are substantial and important differences still to be bridged, but we’re getting on with it,” British Prime Minister Boris Johnson told reporters. EU chief negotiator Michel Barnier tweeted “Same significant divergences persist”.
VIRUS VS VACCINE
U.S. stock index futures edged higher as optimism around an economic rebound next year outweighed concern over an expected surge in coronavirus infections during the Thanksgiving holiday.
U.S. hospitalizations for COVID-19 are at a record and experts warn that gatherings could lead to further infections and deaths.
More than 20 million people across England will be forced to live under the toughest restrictions even after a national lockdown ends on Dec. 2. Partial lockdowns in some European countries have also raised concern about economic growth.
The European Central Bank’s chief economist highlighted these concerns, saying there were “some worrying signals” in financing conditions in Europe for small and medium-sized enterprises, which pushed European bond yields lower.
German 10-year Bund yields traded near two-week lows on Friday, while Portugal’s 10-year government bond yields touched zero for the first time.
The euro, which last bought $1.1924, showed little reaction because currency traders have largely priced in expectations for additional ECB easing next month.
The dollar, which has fallen more than 2.2% so far this month as global sentiment has surged, lessening demand for the safe-haven currency, was near its lowest in nearly three months.
“Surely euro-dollar can’t break through $1.20 without good news on the (Brexit) trade deal,” Societe Generale’s Juckes said.
The yield on benchmark 10-year Treasury notes fell to 0.8586% as some investors sought the safety of holding government debt.
In commodity markets, copper, a gauge of global economic sentiment because of its use in infrastructure, hit a near seven-and-a-month high. Oil, though up nearly 30% this month, dipped overnight on oversupply concerns, but Brent recovered in London to rise to $48 per barrel.
Bitcoin, the world’s biggest cryptocurrency, steadied at $17,060 after tumbling 8.4% in the previous session, having failed to take out its record high of $19,666.
The cryptocurrency showed little reaction to a report in the Financial Times that Facebook will introduce its own Libra digital currency in limited format next year.
Bitcoin has rallied around 140% this year, fuelled by demand for riskier assets.