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GLOBAL MARKETS-Global stocks ease as lockdowns sap momentum, oil rebounds

Published 03/24/2021, 05:56 PM
Updated 03/24/2021, 06:00 PM
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* Dollar hits four-month highs
* Oil bounces 2%
* Ifo cuts German growth forecast for 2021
* Wall Street set for steadier start after Tuesday tumble

By Huw Jones
LONDON, March 24 (Reuters) - Global shares eased on
Wednesday as optimism over the pace of recovery from COVID-19
that propelled markets to record highs was fizzling out in the
face of more lockdowns in continental Europe.
European shares hit a two-week low before the pan-European
STOXX .STOXX index of leading companies recovered some lost
ground to trade down 0.18%. Travel stocks were among the biggest
fallers on the prospect of holidays abroad remaining a dream for
now.
Paris .FCHI and Frankfurt .GDAXI were weaker, with
London .FTSE edging up. U.S. stock futures ESc1 pointed to a
steadier start on Wall Street after Tuesday's tumble.
"The mood is fairly fragile as all the optimism that
characterised the push higher over the past two or three weeks
in shares is starting to bleed away on talk of a European third
wave and extensions of pandemic lockdowns in Germany and
France," said Michael Hewson, chief market analyst at CMC
Markets.
The Ifo Institute said Germany's extended lockdown is
delaying recovery, cutting its 2021 growth forecast for Europe's
biggest economy to 3.7% from 4.2% previously.
"Coming on top of EU threats to limit vaccine supplies, it
has created a reassessment of the glide path to any recovery. It
was a big ask to get a return to international travel as soon as
markets were pricing in," Hewson said.
The IHS Markit euro zone flash composite purchasing
management index rose to 52.5 in March from 48.8 in February in
a surprise return to growth this month, as factories ramped up
production at its fastest pace in over 23 years.
But the gathering pace of lockdowns in Europe and slow
vaccine rollout could mean more subdued numbers in April,
analysts said.
A 2% bounce in oil after hefty losses overnight was capped
by the prospect of lower fuel demand because of continued
lockdowns, though analysts said the drop should ease upward
pressure on bond yields and diminish the "inflation scare" in
markets recently. O/R
"The rise in global yields observed over the past few months
seems to have taken a break this week, as investors are probably
awaiting new positive signals on the economic recovery,"
UniCredit bank said in a note to clients.
Benchmark 10-year U.S. Treasury notes US10YT=RR last
yielded 1.6207% after reaching 14-month highs last week.
Inflation expectations declined in Britain, where consumer
price inflation unexpectedly fell to 0.4% in February amid
discounts in clothing.

TAX HIKES?
Wall Street tumbled on Tuesday on concerns about the cost of
infrastructure spending and potential tax hikes to pay for
President Joe Biden's $1.9 trillion relief bill.
Still, the S&P 500 index's .SPX 75% increase from March
2020 troughs represents the biggest rolling 12-month increase in
the index since 1936, Deutsche Bank noted.
U.S. Treasury Secretary Janet Yellen said on Tuesday the
U.S. economy remains in crisis from the pandemic as she defended
developing plans for future tax increases to pay for the new
public investments. Federal Reserve Chair Jerome Powell told U.S. lawmakers that
a coming round of post-pandemic price increases will not fuel a
destructive breakout of persistent inflation. He meets with U.S.
lawmakers again on Wednesday. U.S. manufacturing data was due later on Wednesday.
Asian shares skidded to a two-week trough overnight and the
dollar neared four-month highs.
MSCI's broadest index of Asia-Pacific shares outside of
Japan .MIAPJ0000PUS fell 1.1% to 675.81 points.
In currencies, the dollar index hit a four-month high of
92.608 against a basket of most major currencies. =USD FRX/
The euro EUR= edged toward a four-month low below $1.1833
and traded as low as $1.1813.
Brent crude futures LCOc1 rose 2% to $62.13 a barrel,
after tumbling 5.9% to a low of $60.50 on Tuesday. West Texas
Intermediate (WTI) crude futures CLc1 added 2% to $59, having
lost 6.2% the previous day.
Safe-haven gold was higher at $1,732.5 an ounce.

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