Stocks Start Week Mixed; Euro Edges Up Amid Talks: Markets Wrap

Global stocks began the week in mixed fashion as investors braced for a ramp up in earnings reports and as the coronavirus continued to spread. The dollar pushed higher with Treasuries.

Shares slipped in Australia and South Korea, and were flat in Japan and Hong Kong on below-average volumes. U.S. futures retreated and European contracts were little changed. Chinese stocks outperformed, with gains of more than 2.5%. The euro edged up as European Union leaders continued efforts to reach an agreement on a recovery package, with talks due to resume Monday afternoon. U.S. stocks had closed higher Friday, rounding out a third week of gains. The yen slid with the pound and Swiss franc. Crude oil declined.

Global equities sit near to the upper end of range after huge rally since March

After three weeks of gains for global equities, investors are weighing up the potential for additional policy support as the pandemic continues to impact economies. Company results are in focus too, with a flurry of earnings reports coming this week.

On the coronavirus front, Hong Kong added a record 108 infections, will require civil servants to work from home and plans to mandate wearing of masks in all shared indoor areas. In the U.S., Los Angeles Mayor Eric Garcetti warned that the city is on the brink of another stay-at-home order. New York takes another step in its re-opening Monday.

“Our base case remains for the economic recovery to continue, but for the deep V rebound evident in much recent data to give way to a slower bumpier recovery going forward,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. “Shares are still vulnerable to a further correction or consolidation, with renewed lockdowns and the U.S. presidential election being the main risks.”

In Europe, efforts continued to agree a 750 billion euro ($856 billion) stimulus package, amid differences over how much of the recovery fund should be distributed through grants versus low-interest loans.

The four governments that have been holding up negotiations are ready to agree on a key plank of the deal, two officials said. The Netherlands, Austria, Denmark and Sweden are satisfied with 390 billion euros of the fund being made available as grants with the rest coming as low-interest loans, the officials said, asking not be named discussing private conversations.

“This is the pattern of negotiations and treaties in Europe, where European leaders really argue until the last minute before arriving to a consensus and a package,” Mathieu Savary, a strategist at BCA Research, said on Bloomberg TV. “We do not think that the absence of an agreement this weekend, at least so far until now, is the death knell of an agreement.”

Here are some key events coming up:

  • Quarterly earnings gather steam, including Blackstone Group, Microsoft, Roche, Intel, Unilever, Canadian Pacific, UBS, Tokyo Steel, Daimler, Hyundai and Mattel.
  • The EIA crude oil inventory report is due Wednesday.
  • U.S. weekly jobless claims come on Thursday.

These are the main moves in markets:

Stocks

  • Futures on the S&P 500 slipped 0.5% as of 6:10 a.m. in London. The gauge climbed 0.3% on Friday.
  • Japan’s Topix index fell less than 0.1%.
  • Hong Kong’s Hang Seng index was little changed.
  • The Shanghai Composite rose 2.5%.
  • Australia’s S&P/ASX 200 Index fell 0.6%.
  • Euro Stoxx 50 futures were little changed.

Currencies

  • The yen fell 0.3% to 107.36 per dollar.
  • The offshore yuan was at 6.9927 per dollar.
  • The euro added 0.1% to $1.1441.

Bonds

  • The yield on 10-year Treasuries fell one basis point to 0.62%.
  • Australia’s 10-year yield rose one basis point to 0.88%.

Commodities

  • West Texas Intermediate crude fell 0.6% to $40.35 a barrel.
  • Gold was at $1,807.84 an ounce, down 0.1%.
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