LONDON/SHANGHAI - Global shares stumbled on Friday as hopes of a fiscal boost provided by a US$1.9 trillion US stimulus plan were smothered by the prospect of stricter lockdowns in France and Germany.
Wall Street’s main indexes opened lower as President-elect Joe Biden’s stimulus plan sparked fears of an increase in taxes, while investors parsed quarterly reports from major US lenders.
The Dow Jones Industrial Average fell 64.7 points, or 0.21 percent, at the open to 30926.77. The S&P 500 fell 6.8 points, or 0.18 percent, at the open to 3788.73, while the Nasdaq Composite dropped 12.7 points, or 0.10 percent, to 13099.895 at the opening bell.
European stocks followed Asian markets lower, with the pan-European STOXX 600 down 0.8 percent and London’s FTSE 100 0.8 percent weaker, with the latter clobbered by data showing Britain’s economy shrank in November for the first time since the initial COVID-19 lockdown last spring.
The MSCI world equity index, which tracks shares in 49 countries, was 0.3 percent lower. S&P 500 e-mini futures shed 0.3 percent to 3,779.
Earlier on Friday, an Asian regional share index had edged near record highs after Biden unveiled his plan to jump-start the world’s largest economy and accelerate its response to the coronavirus.
In prime-time remarks, Biden outlined a proposal that includes US$415 billion aimed at the COVID-19 response, some US$1 trillion in direct relief to households, and roughly US$440 billion for small businesses and communities hard hit by the pandemic.
But that initial boost later faded as risk appetite waned, lifting bond prices and the dollar, and hitting equities.
“People are saying it’s a big number but markets are almost acting like its a disappointment,” said James Athey, investment director at Aberdeen Standard Investments.
“I think maybe the market was pricing an additional US$2,000 cheque going to the US population, but what’s being proposed is a top-up of US$1,400 to take the total to US$2,000 because US$600 has already been agreed.”
Investors also digested the prospect of rising taxes to pay for the plan.
“The concern is what it’s going to mean from a tax stand point,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don’t often ignore taxes.”
Biden’s comments came after Federal Reserve Chair Jerome Powell struck a dovish tone in comments at a virtual symposium with Princeton University.
Powell said the US central bank is not raising interest rates anytime soon and rejected suggestions the Fed might start reducing its bond purchases in the near term.
Investor concerns over the prospects for a global economic recovery were raised after France strengthened its border controls and brought forward its night curfew by two hours to 6 pm for at least two weeks to try to slow the spread of coronavirus infections, while Germany Chancellor Angela Merkel called for “very fast action” to counter the spread of variants of the coronavirus.
Chinese blue chips eased 0.2 percent, snapping a four-week winning streak.
On Friday, US earnings season will kick into full swing with results from JPMorgan, Citigroup and Wells Fargo. Investors will be looking to see if banks are starting to take down credit reserves, resume buybacks, and provide guidance that shows the economy is improving, said Thomas Hayes, chairman of Great Hill Capital in New York.
In the currency market, the US dollar rose.
The dollar index was at 90.407 versus a basket of currencies, up 0.2 percent on the day. It was on track for a weekly gain of around 0.4 percent, making this its strongest week since November.
Against the stronger dollar, the euro was down 0.2 percent at US$1.21325.
US yields stepped back as risk appetite waned. Benchmark 10-year Treasury notes yielded 1.1039 percent, down from a US close of 1.129 percent on Thursday, while the 30-year yield dipped to 1.8451 percent from 1.874 percent.
In Europe, Italy’s bond market was poised to end the week calmer, as 10-year bond yields were down 2 basis points at 0.59 percent.
Italian Prime Minister Giuseppe Conte resisted calls to resign on Thursday after a junior coalition party led by former premier Matteo Renzi pulled out of the government on Wednesday and stripped it of its majority.
Oil prices, which had risen on a weak dollar and strong Chinese import data, dropped.
Brent crude oil futures fell 1.5 percent, to US$55.56 a barrel while US crude lost 1.1 percent to US$52.99.
Spot gold rose 0.1 percent to US$1,847.00 per ounce.
HONG KONG NEWS