- The Stoxx 50 index of major eurozone stocks hit a four-month low, while German bond yields fall to their lowest since mid-March.
- The surge in cases in France could lead to another national foreclosure, which has hit the euro, the price of oil and French bank stocks in particular.
- “The markets have already started to assess new lockouts – partial or full,” said Milan Cutkovic, market analyst at Axi.
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European stocks slipped to their lowest level in four months, falling more than 3% as investors shied away from risky assets in light of new foreclosure restrictions emerging in the heart of the zone’s economy euro, hitting bank stocks and the price of oil.
Some nervousness ahead of next week’s US presidential election is adding to risk aversion as record rise in US cases of COVID-19 has encountered uncertainty over the possibility of a longer run tight than expected for the White House.
The Stoxx 50 index of major eurozone stocks fell 3.3% to its lowest level since late May, predicted for its biggest one-day drop in more than a month. The index lost nearly 7% in October, the most in a month since March.
All major equity sectors were in the red, with banks and oil and gas indices the heaviest losses, down 3.8% and 3.4%, respectively.
With the threat of further damage from the coronavirus pandemic weighing on the economy, the price of oil has fallen nearly 4% and investors have flocked to the relative safety of the US dollar, pushing the dollar index higher by 0.4%.
“As Germany and France are said to be on the verge of announcing a nationwide lockdown, it’s no surprise to see these economic fears centered around Europe. Meanwhile, with the US election slated for next week, traders have many reasons to be hesitant ”. IG Markets analyst Joshua Mahony said.
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Bank stocks are among the most sensitive to the ebb and flow of investor confidence in the economy, and many of the region’s top financial stocks have come under fire. Investors reserved their most severe sanction for French banks, lowering Natixis, Crédit Agricole, BNP Paribas and Société Générale from 6% to 7%.
France could enter another national lockdown this week, according to the French daily Liberation, as the spiral of COVID-19 cases prompted President Emmanuel Macron to address the country on Wednesday evening.
The VDAX-New, which reflects investors’ appetite for risk, climbed nearly 13% to its highest level since the end of June. German ten-year bond yields fell 3 basis points to -0.636%, their lowest since the depths of the coronavirus market crisis in early March. French bond yields were virtually unchanged at -0.33%.
“Markets have already started to anticipate new lockouts – partial or full. Whether it will result in a dramatic collapse as seen in March or whether markets can rebound soon will depend primarily on the speed and resolve of governments and central banks to respond to the second wave of infections. , which imposes new restrictions on daily life, ”
The euro slipped against most major currencies, losing 0.3% against the dollar and 0.4% against the yen.
U.S. equity futures fell between 0.9% and 1.6%, indicating another drop on Wall Street later, when investors will have to digest a slew of profits from Boeing, Visa, Mastercard and Etsy. In Asia, equities resisted the downtrend, leaving the Shanghai Composite up 0.5% and KOSPI up 0.4%, while the Nikkei lost 0.3%.
Meanwhile, Bitcoin continued its meteoric rise towards $ 14,000, hitting its highest level since January 2018 and taking gains this month to 26%.
Brent futures fell 3% to $ 40.37 a barrel, while WTI fell 3.7% to $ 38.90 a barrel and the entire energy complex collapsed. Heating oil futures, which tend to outperform well as Europe enters the winter season, fell 2.7%.
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