World stocks pull back for a third day on new Covid-19 restrictions

London/Sydney — World stocks eased for a third day and oil fell on Thursday tracking overnight weakness in Asia and Wall Street as widening Covid-19 restrictions weighed on market sentiment.

Positive news about potential vaccines had helped push the MSCI world index to a record high earlier in the week, only to see investors pull back as a host of countries announced record infection rates and tougher lockdowns.

At 8.44am GMT, the broad gauge of global equities was trading down 0.3% while Europe’s major indices were down about 0.7%. Oil prices also eased as virus restrictions crimped demand expectations.

The weaker sentiment was triggered by a late US sell-off overnight that had seen the S&P 500 close down 1.1%, weighed by news that Covid-19 deaths in the world’s biggest economy had passed 250,000, underpinning a host of lockdowns.

There was similarly sombre news in Japan, where a record number of cases and a rise in Tokyo’s pandemic alert level sent the Nikkei down 0.4%. MSCI’s broadest index of Asia-Pacific shares excluding Japan fell 0.5%.

“The biggest question in the markets right now is whether the headlines of renewed school closures, lockdowns and social restrictions is enough to derail vaccine positives and the fact that Covid-19 survival rates are climbing along with the hospitalisation and infection rates,” said a London-based trader.

The positive vaccine news had continued after Pfizer said its Covid-19 vaccine was 95% effective and it would apply for emergency US authorisation within days, after a similar recent report from Moderna.

Looking ahead, Wall Street futures point to a steady open, with all eyes on the US Federal Reserve for further signs it could step in with fresh monetary stimulus — something two officials nodded to on Wednesday. 

Investors will also await US jobs data at 1.30pm GMT.

Against a basket of currencies the dollar was last at 92.575, marginally in the black but just off its recent low of 92.129. The euro, meanwhile, was down 0.1% and just short of the recent peak of $1.1919.

“The vaccines news are a positive, medium-term impulse for the global economic outlook and investors are trying to weigh that against the prospect of an imminent stalling of the European and US recovery amid the prospect of extensions of current lockdown measures,” said Rodrigo Catril, a senior forex strategist at National Australia Bank.

Sterling, however, was weaker still, down 0.5% after a report that Europe’s leaders would demand the European Commission publish no-deal plans as the deadline for talks over a trade deal go down to the wire.

Despite the equity market caution, gold traders continued to take a longer-term view, betting the Covid-19 vaccines would translate into a quicker economic recovery, sending gold to a one-week low.

Bitcoin, sometimes regarded as a safe haven or at least a hedge against inflation, also pulled back and last stood at $17,500.

Reuters