Asian shares got off to a subdued start on Monday as surging coronavirus cases in Europe and the United States threatened the global outlook, while China’s leaders meet to ponder the future of the economic giant.
The United States has seen its highest ever number of new COVID-19 cases in the past two days, while France also set unwanted case records and Spain announced a state of emergency.
That combined with no clear progress on a US stimulus package to pull S&P 500 futures down 0.5 percent. EUROSTOXX 50 futures eased 0.4 percent and FTSE futures 0.3 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan went flat, still short of its recent 31-month peak. Japan’s Nikkei dithered either side of steady, and South Korea’s main index lost 0.3 percent.
Chinese blue chips shed 1.1 percent as the country’s leaders met to chart the nation’s economic course for 2021-2025, balancing growth with reforms amid an uncertain global outlook and deepening tensions with the United States.
A packed week for monetary policy sees three major central banks hold meetings. The Bank of Canada and Bank of Japan are expected to hold fire for now, while the market assumes the European Central Bank will sound cautious on inflation and growth even if they skip a further easing.
Data due out Thursday is forecast to show US economic output rebounded by 31.9 percent in the third quarter, after the second’s quarter’s historic collapse, led by consumer spending.
Analysts at Westpac noted that such a bounce would still leave GDP around 4 percent lower than at the end of last year, with business investment still lagging badly.
“To fully recover the activity lost, additional meaningful fiscal stimulus is a must,” they argued in a note.
The US Presidential election will again loom large as markets move to price in the chance of a Democratic president and Congress, which would likely lead to more government spending and borrowing down the road.
That outlook drove US 10-year Treasury yields to their highest since early June last week at 0.8720 percent. They were trading at 0.83 percent on Monday.
“We have raised the probability of a Democratic sweep, already our base case, from 40 percent to just over 50 percent and have increased our expectation of Biden to win from 65 percent to 75 percent,” wrote analysts at NatWest Markets in a note.
“We see steeper US yield curves and a weaker dollar as likely to prevail in our base case.”
The dollar was flatlining on Monday, having fallen broadly last week. The euro was holding at $1.1840 and just under its recent top of $1.1880, while the dollar was pinned at 104.80 yen and not far from last week’s trough of 104.32.
The dollar index was a fraction firmer at 92.904, after shedding almost 1 percent last week.
In commodity markets, gold edged down 0.1 percent to $1,898 an ounce.
Oil prices fell further in anticipation of a surge in Libyan crude supply and demand concerns caused by surging coronavirus cases in the United States and Europe.
Brent crude futures lost 65 cents to $41.12 a barrel, while US crude fell 69 cents to $39.16.