World stocks are fairly static as gold goes on a wild ride

London — Europe’s stock markets held their own on Wednesday after doubts emerged about fresh US stimulus, while it was shaping up to be another wild day for gold and silver, as well as Turkey’s troubled lira.

A lively start to European trading saw sterling shrug at news that Britain had seen its worst economic quarter on record thanks to Covid-19. Gold swung almost 4% after its biggest fall in seven years and German bund yields hit two-week highs amid a deluge of global debt issuance.

Turkey’s volatile lira took another 1.5% pounding as concerns about its economic health and policymaking took hold again, while New Zealand dollar’s dropped just 0.4% after its central bank signaled it would stay highly supportive.

Mixed sentiment had dragged on Asian stocks as sniping continued between China and the US. Beijing had also reported weaker-than-expected loan growth, while the US Senate’s majority leader described stimulus talks there overnight as “at a bit of a stalemate”.

“The bias at the moment is probably to fade the S&P 500 and fade risk generally,” said Société Générale strategist Kit Juckes. “What happens next probably depends on what happens in US equity markets [which are focused on stimulus] … That might be the decisive factor for short-term sentiment.”

On Wall Street on Tuesday, the S&P 500 snapped a seven-day winning streak after coming within reach of its all-time peak hit in February just before the global outbreak of the Covid-19.

Barring a bipartisan deal on stimulus, the US economy could be left with measures US President Donald Trump called for on Saturday through executive orders to bypass Congress.

“We have enormous uncertainty. It appears it’s getting harder for both sides to compromise as the election nears … Trump’s proposals would be smaller than markets have expected. There’s question over whether they are viable, too,” said Junpei Tanaka, strategist at Pictet.

The US election campaigns look set to gather steam after Democrat presidential candidate Joe Biden selected senator Kamala Harris as his vice-president.

The 10-year US treasuries yield climbed a couple of basis points (bps) to 0.67% in Europe to stay at a one-month high. The 10-year yield (+6.6bps) and 30-year (+7.5bps) yields saw their biggest increases in more than a month on Tuesday, while the 2s10s curve steepened 4.6bps, the most since June 5. The gap between US two-year and 10-year treasury yields is a metric closely watched for signs of a slowdown.

On top of hedge selling ahead of the largest-ever 10-year note auction later in the day, bonds have also lost some of their safe-haven allure on rising hopes of vaccines against Covid-19.

Russian President Vladimir Putin said on Tuesday his country was the first to grant regulatory approval to a Covid-19 vaccine after less than two months of human testing. While Moscow’s decision raised some eyebrows, the news lifted hope some of the vaccines currently in development would become available earlier than expected.

Oil prices edged up after bigger-than-expected drop in US inventories, with Brent up 0.6% at $44.75 a barrel. US crude was up 0.5% at $41.80.

The most dramatic move took place in precious metals though.

Gold swung from being down 2% to being up 1.7% at $1,935 an  ounce, a day after it suffered its biggest daily fall in seven years. Silver was even more wild, rising nearly 4% in Europe after a 15% plunge on Tuesday.

Reuters