By Marc Jones
LONDON (Reuters) – Market hikes were forced to stop Tuesday and high-flying currencies like the euro and the Australian dollar lost altitude as a weeklong risk rally is faced with turbulence.
Everything seemed so sudden. Asian stocks marked their ninth day of gains after the historic highs on Wall Street on Monday, but major European markets opened with a jump of 0.5% to 1.5% in the red.
The euro fell 0.3% () in just its second decline in 11 days, bonds were back in favor, while another beard from China in its spat with Canberra saw the dollar
“It looks like the foreign exchange market is looking at the equity market and thinks that maybe we should position ourselves for a correction,” said Kit Juckes, Societe Generale (OTC 🙂 strategist, referring to the recent surge in markets global scholarship recipients.
“It will depend on what the US market is doing today because we have the FOMC (US Federal Reserve) announcement tomorrow …” but why wouldn’t you buy yen at this point “. ”
Optimism for the stock markets came last week after US employment data showed a surprise drop in the unemployment rate. Wall Street indices surged, as the Nasdaq () closed at a record level on Monday.
World markets were crippled in March when the short and long term consequences of the damage to the global economy caused by the coronavirus pandemic were cause for concern. But most of the indices have now returned to levels prior to COVID-19.
The MSCI (NYSE ? largest Asian equity index outside Japan () has risen for the ninth consecutive session in its longest winning streak since early 2018. The world index of 49 countries is up nearly 45% compared to the 4-year lows reached in mid-March.
“The good news is that it shows that central bank efforts to stabilize the market have worked,” said Tai Hui, chief Asian market strategist at J.P. Morgan Asset Management.
Fears of renewed trade tensions between the United States and China and the second-round impact of rising unemployment and bankruptcies are weighing on the outlook, however.
In its latest report on the global economic outlook on Monday, the World Bank said that advanced economies are expected to shrink 7.0% in 2020, while emerging market economies will contract by 2.5%, their first collapse since aggregated data became available in 1960.
In terms of gross domestic product per capita, the global contraction will be the deepest since 1945-1946, when spending in the Second World War dried up.
Tuesday’s market flicker saw the Japanese yen safe haven go up 0.4% to 107.93, while gains in the US dollar elsewhere saw the greenback index jump its strongest since May 22.
The mood had also changed in the commodity markets. Oil prices () fell more than 1% in London after Brent reached its highest level in more than three months at $ 41 a barrel (). Gold fell as industrial metals, nickel and aluminum all fell.
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