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GLOBAL MARKETS-Stocks, oil slip but Chinese stocks rally a sixth day

Published 07/08/2020, 04:17 AM
Updated 07/08/2020, 04:20 AM
© Reuters.
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(Adds close of U.S. markets)
* European stocks fall, world shares end win streak
* A$ falls as Melbourne reintroduces some lockdown measures
* Commodities weaker overall, but copper at five-month high
* U.S. dollar regains traction in FX markets

By Herbert Lash
NEW YORK, July 7 (Reuters) - Investor caution over renewed
coronavirus-related lockdowns buoyed the dollar and snapped a
five-day rally in most world equity markets on Tuesday, but was
not enough to halt a hot streak in Chinese stocks.
The dollar edged higher as risk currencies such as the
Australian dollar took a breather from recent gains and gold
dipped as investors booked profits after bullion rallied to a
near eight-year peak, trading around $1,780 an ounce.
Bourses in London .FTSE , Paris .FCHI and Frankfurt
.GDAXI fell about 1% for most of the session before paring
some losses, while losses were greater on Wall Street even as
the Nasdaq posted a fresh intraday high before closing down.
U.S. Treasury yields ticked lower as a rising caseload of
COVID-19, the respiratory disease caused by the novel
coronavirus, raised concerns about economic reopening plans.
The greater Miami area in Florida became the latest U.S.
coronavirus hot spot to roll back its reopening. Cases surged
nationwide by the tens of thousands and the U.S. death toll
topped 130,000. Stocks have rallied on the belief therapies and vaccines
will be developed to deal with the coronavirus and that the
United States has enough experience with the pandemic to avoid
economy-wide lockdowns, said David Joy, chief market strategist
at Ameriprise.
But the three states where infections are currently the most
intense - California, Texas and Florida - are the three most
populous and account for almost one-third of U.S. gross domestic
product, Joy said.
"Other countries have shown it is possible to knock this
virus down," Joy said. "But it takes social discipline and that
seems to be in short supply here."
MSCI's all-country world index .MIWD00000PUS , which tracks
shares in 49 nations, fell 5.24 points, or 0.97%, while Europe's
broad FTSEurofirst 300 index .FTEU3 dropped 0.62%.
On Wall Street, the Dow Jones Industrial Average .DJI fell
396.85 points, or 1.51%, to 25,890.18 and the S&P 500 .SPX
lost 34.4 points, or 1.08%, to 3,145.32. The Nasdaq Composite
.IXIC dropped 89.76 points, or 0.86%, to 10,343.89.
Lockdown measures were also reimposed in Melbourne,
Australia, confining its nearly 5 million residents to all but
essential travel for another six weeks.
Corporate earnings are expected to fall by about 20% percent
this year following the deepest recession in more than a
century. Pictet Asset Management expects a 30% to 40% slump.
"But that does not mean equity and corporate bond markets
are due a sharp fall," said Luca Paolini, chief strategist at
Pictet Asset Management.
Paolini predicted the U.S. Federal Reserve will inject a
further $1.3 trillion of stimulus this year and the European
Central Bank will add another 1.1 trillion euros ($1.24
trillion).
The euro EUR= was last down 0.34% at $1.1269.
The euro zone economy will drop into a deeper recession this
year than previously expected and take longer to rebound, the
European Commission forecast. The commission said the 19-nation
single currency area would contract a record 8.7% before rising
by 6.1% in 2021, worse than its previous forecast. The dollar index =USD , which tracks the greenback versus a
basket of six currencies, rose 0.22% to 96.942. The yen JPY=
was up 0.20% at $107.5700.
Analysts said signals from the Chinese government through a
state-sponsored journal on "fostering a healthy bull market,"
published on Monday, helped the buying binge in Chinese shares.
Chinese blue-chips rose for a sixth straight day to close at
highs last seen in June 2015 as retail investors rushed to join
an officially sanctioned bull market. The Shanghai index pared earlier gains of more than 2% as
investors consolidated their positions after some analysts drew
parallels with a stock market boom-and-bust five years ago.
Copper prices soared to their highest in more than five
months due to strong demand prospects in top consumer China and
worries about supplies from Chile, the world's largest producer
of the red metal.
Oil prices edged higher after the U.S. government forecast
higher fuel demand and lower production, overshadowing concerns
that the surge in new coronavirus cases would hamper demand.
The U.S. Energy Information Administration (EIA) forecast
global oil demand would recover 101.1 million barrels per day
(bpd) by the fourth quarter of next year.
Brent crude futures LCOc1 slid 2 cents to settle lower at
$43.08 a barrel, while U.S. crude futures CLc1 fell 1 cent to
settle at $40.62 a barrel.
Spot gold rebounded to within striking distance of $1,800 an
ounce on the potential that a sharp jump in COVID-19 cases would
lead to more accommodative monetary policy measures and greater
demand for the safe-haven metal.
U.S. gold futures GCv1 settled up 0.9% at 1,809.90 an
ounce after earlier striking the highest since September 2011 at
$1,810.80.



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