Oil and euro slip, markets on edge over COVID-19 curbs in Europe

Sydney, Nov 22 (BNA): Asian stocks had a weak start to the week on Monday while oil and the euro were under pressure, with the return of COVID-19 restrictions in Europe and talk of accelerating tapering from the US Federal Reserve’s position. Investors at the ready.

Oil futures fell about 1% at the open, pushing Brent and US crude to seven-week lows of $78.05 and $74.76, respectively, on oversupply concerns.

Australian shares fell 0.4%, led by losses in banking shares. Japan’s Nikkei fell 0.3% and MSCI’s broadest index of Asia Pacific shares was flat.

There are question marks about the resilience of Europe and the European economy, said Rodrigo Cattrell, a strategist at National Australia Bank in Sydney, exacerbated by the protests and infection rates seen over the weekend.

“It’s hard to see the US dollar getting hurt against this background,” he said, a view underscored by recent strong US data and hawkish statements from Federal Reserve officials.

The euro fell 0.2 percent to $1.1280, close to a 16-month low. The common currency has been the main driver in the markets in recent sessions as investors are betting that the European economy is far behind the US recovery.

Safe haven assets such as bonds, gold and the yen also benefited from the recent cautious tone in financial markets.

On Monday, the yield on the 10-year US Treasury was stable at 1.5634%. Gold found support at $1,845 an ounce. The yen fluctuated at 114.09 per dollar.

The risk-sensitive Australian dollar also fell to a seven-week low of $0.7227. South Korean stocks were divergent as chip makers followed their US counterparts higher with a bright outlook for memory chip demand.

S&P 500 futures rose 0.2% after Wall Street indexes fell on Friday.

Trade is likely to weaken this week by Thanksgiving in the US, but the cautious tone has again prompted traders to monitor cases of COVID-19 in Europe as well as monitor central bank spokespeople, particularly in Britain and Europe.

Austria began its fourth lockdown on Monday – with neighboring Germany warning, it may follow suit – as protests against the restrictions erupt across the continent.

Surveys scheduled for Europe and Britain during the week are expected to show a downward trend in production and sentiment.

“The combination of the emerging coronavirus, growth and geopolitical concerns in the eurozone supports safe haven operations,” said Jane Foley, head of FX strategy at Rabobank.

She added, expecting the price to settle around $1.12 by the middle of next year:

Meanwhile, the US economy has surprised analysts with stronger-than-expected retail sales data and sharp inflation in recent weeks. The focus this week is on prices, the labor market and what the Federal Reserve can do about its strength.

Fed Vice President Richard Clarida said last week that accelerating the taper may be something worth discussing at the December meeting. The minutes of the Federal Reserve’s meeting are scheduled for release on Wednesday.

China maintained benchmark lending rates for corporate and household loans for the 19th month on Monday, as expected.

Central banks in South Korea and New Zealand are expected to raise rates this week, with the swap markets pricing in about a 40% chance of a 50 basis point rate hike in New Zealand.

Bitcoin has come under pressure after last week posting its worst week in two months, last sitting at $58,180.

HF