Stock

Equities take a breather, bonds beneath strain from either side

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© Reuters. FILE PHOTO: A man wearing a protective face mask walks past a stock market quote in front of a broker in Tokyo amid coronavirus disease (COVID-19) outbreak

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By Huw Jones

LONDON (Reuters) – Stocks were mixed on Tuesday as investors paused to assess how much worse the COVID-19 pandemic could get as they wait for a new profitable season on Wall Street to break new ground to strike.

US bonds remained under pressure, with yields building from their 10-month highs, but not yet at levels that make them more attractive than stocks, analysts said.

The blue-chip indices in London, Paris and Frankfurt barely changed in early trading on Tuesday. European stocks hit their 10-month highs last week but had eased on Monday.

Oil companies BP (NYSE :), Royal Dutch Shell (LON 🙂 and Total all rose as crude oil prices rose on expectations of a decline in US inventories.

"It's a bit of a pause for thought after we've become a total flyer this year," said Michael Hewson, chief market analyst at CMC Markets.

"The main focus now is on how much worse it can get in terms of COVID in the UK and Europe, and China is starting to see signs of a second wave," Hewson added.

Important corporate earnings news or important economic data were hardly in the way, as the markets with the banks JPMorgan (NYSE :), Citi and Wells Fargo (NYSE 🙂 reporting on Friday.

"The big impact of this will be how much more they'll put aside on loan loss provisions since they were pretty heavy in 2020 and how many of the US banks are resuming buybacks and dividends," Hewson said.

"I guess there won't be as many as people think."

A bond sell-off was fueled by the prospect of further stimulus from the US government under President-elect Joe Biden, who will take office next week.

Returns were also supported by the markets, which placed bets on the Federal Reserve's rate hikes through 2023 and a withdrawal or reduction in asset purchases before that point.

The benchmark 10-year US government bond yield, which rose as prices fell, rose 1.6 basis points to 1.149% after hitting a new 10-month high of 1.1580%. (US/)

were 0.14% higher.

The US dollar held up recent gains, aided by the surge in US Treasury bond yields.

Profit taking

Consolidation was also an overnight theme in Asia, where MSCI's broadest index for stocks in Asia Pacific outside Japan fell 0.5% after hitting an all-time high on Monday, led by a 2.6% decline in South Korea, as investors made some profit from a soaring Kospi. ()

Drug makers hit a new three-decade high after reports of another effective COVID-19 treatment, although the index fell to 0.16% in the afternoon. ()

Strong inflows helped Chinese blue chips rise 1.11%. (.SS)

A resurgent US dollar held gains against other major currencies for four days and kept the euro and yen close to multi-week lows. (FRX /)

"We've had a very strong week or so (in stocks) and I think the lower moves we're seeing are a bit profitable," said Chad Padowitz, chief investment officer at Talaria Capital in Melbourne.

The Nasdaq posted modest losses on Wall Street overnight, falling 1.3% as investors sold tech giants that had taken action against Trump and his supporters. ()

rose 0.68% to $ 56.04 while trading at $ 52.65 a barrel, up 0.4%. (OR)

Gold, which was sold when US yields rose for not paying interest, stayed at $ 1,853 an ounce, up 0.5% (GOL /).

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