NEW YORK (Reuters) – Global stock markets plunged on Monday to close a record month as the prospect of a vaccine-led economic recovery next year and further central bank stimulus overshadowed immediate concerns about the coronavirus pandemic.
November’s record 13% jump added $ 6.7 trillion – or $ 155 million per minute – to the value of global stocks.
At the same time, oil, industrial commodities and other risky assets surged, with emerging market currencies recording their largest gains in nearly two years, while safe-haven stocks such as the dollar and the gold have retreated.
“It’s been a very, very strong month for the markets, especially on the equities side, but also on the fixed income side as well,” said Elwin de Groot, head of macroeconomic strategy at Rabobank.
The positive developments regarding vaccines and the speed with which they are likely to be deployed have been key factors.
“And this market is still very much supported by central bank liquidity,” De Groot said. As the European Central Bank prepares to provide more stimulus next month, “the market perspective seems to be: what can go wrong?”
The MSCI indicator of equities across the world fell 0.39% after modest declines in Asia and mixed trading in Europe. Many European markets are posting the best month in their history, with France up 21% and Italy almost 26%. The Nikkei’s 15% jump in Japan was its best month since 1994.
On Wall Street, the Dow Jones Industrial Average fell 190.36 points, or 0.64%, to 29,720.01, the S&P 500 lost 6.4 points, or 0.18%, to 3,631.95 and the Nasdaq Composite added 29.91 points, or 0.25%, to 12,235.76.
The surge in equities put competitive pressure on safe-haven bonds, but this was largely dampened by expectations of increased asset purchases by central banks.
US benchmark 10-year notes last fell 2/32 of price to drop 0.8471%, down from 0.842% on Friday night.
“The markets are overbought and risk a short-term pause,” said Shane Oliver, head of investment strategy at AMP Capital.
“However, we are now in a strong seasonal part of the year and investors have yet to fully discount the potential for a very strong recovery in growth and earnings next year as the stimulus combines with vaccines.”
On Monday, a survey showed factory activity in China exceeded November forecasts, and the country’s central bank surprised with more help from cheap loans.
Moderna provided the regular dose of vaccine news on Monday, saying it is seeking emergency use authorization from the U.S. Food and Drug Administration and conditional approval from the European Union.
Federal Reserve Chairman Jerome Powell testified before Congress on Tuesday amid speculation about new policy measures at his next meeting in mid-December.
Against a basket of currencies, the dollar index was pinned at 91.704 after losing 2.4% for the month to lows last seen in mid-2018.
One of the main victims of the risk rush was gold, which was near a five-month low at $ 1,769 an ounce, after losing 5.6% in November.
Oil, on the other hand, benefited nearly 30% from the prospect of a recovery in demand if vaccines allowed travel and transportation to resume next year.
Some profit-taking started early Monday ahead of an OPEC + meeting to decide whether the producer group will extend large production cuts.
US crude recently fell 0.51% to $ 45.30 a barrel and Brent was at $ 47.84, down 0.71% on the day.
(Chart: November to remember for emerging market equities)
(Chart: Global equities set for record month)
Reporting by David Randall; edited by Jonathan Oatis