LONDON: Global stocks slipped to record highs on Friday as gloomy data reminded investors of the struggles in the economic recovery, dampening a recovery fueled by hopes of a US stimulus by new President Joe Biden.
Sentiment in Europe was already more cautious after Thursday’s European Central Bank meeting, in which the bank’s message was seen as more hawkish than expected.
The yield on Italian 10-year benchmark bonds hit their highest level since early November on reports that Prime Minister Giuseppe Conte could be tempted by the prospect of a snap election.
The Euro STOXX 600 was 1% weaker, heading for its worst daily performance of the year so far, as investors digested weaker flash PMI readings for January. Lockdown restrictions to contain the coronavirus pandemic have hit the bloc’s dominant service sector.
The FTSE 100 index slipped 0.7%, with data showing UK retailers struggled to recover in December from a partial coronavirus lockdown the month before.
The MSCI World Stock Index, which tracks stocks from nearly 50 countries, fell 0.3% after three consecutive sessions of gains. Futures contracts on E-Mini for the S&P 500 stumbled 0.7%.
The largest MSCI index for Asia-Pacific stocks outside of Japan was 0.8% lower.
The risk mood followed a period of relief following the U.S. transition of power, culminating with Biden’s inauguration on Wednesday, and high expectations that the U.S. stimulus will provide continued support to global assets.
“The fact that there would be US stimulus was well known and the size of the package and the very high level details of what they are aiming for with the package were well known some time ago,” James said. Athey, chief investment officer at Aberdeen Standard Investments.
“The realities of what is likely to be achievable relatively quickly do not favor blind buying of cyclical assets. There are a lot more nuances and a lot more politics to be done before we get there.”
Republicans in the U.S. Congress have indicated they are prepared to work with Biden on his administration’s top priority, a $ 1.9 trillion U.S. fiscal stimulus package, though some are opposed to the price.
Democrats took control of the US Senate on Wednesday, though they still need Republican support to pass the plan.
The Chinese composite stock index slipped 0.4%, while the blue chip CSI300 index edged up 0.1%.
Travel plans were in limbo for tens of millions of people in cities across northern China. They have been under some sort of lockdown amid fears that undetected coronavirus infections could spread quickly over the Lunar New Year holiday, which is only a few weeks away.
China reported 103 cases of COVID-19 on Friday.
In currency markets, the US dollar gained after three straight days of losses, although it was still on track for its biggest weekly loss since mid-December. The currency was slightly higher on the day at 90.182.
The Japanese yen fell about 0.1% against the dollar to 103.63.
Data from Japan overnight showed factory activity entered into contraction in January and the service sector was more pessimistic as emergency measures to tackle a COVID-19 resurgence hit the feeling.
The recent decline in the dollar was led by investors investing money in higher yielding currencies, optimistic about a rapid economic recovery led by the US stimulus.
In the commodities sector, oil prices have been weighed down by fears that new pandemic restrictions in China will reduce fuel demand from the world’s largest oil importer.
Brent futures fell 2.5% to $ 54.68 a barrel. US crude was 2.6% lower at $ 51.75 a barrel.
Spot gold was down 1.1% to 1,849.3 an ounce.