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Europe stands still after China’s bull attack continues



LONDON (Reuters) – A five-day indictment of world stocks was fizzled out on Tuesday when renewed caution against renewed coronavirus bans, although this was not enough to completely erase China’s hot phase in July.

FILE PHOTO: The DAX chart of the German stock index is shown on the Frankfurt Stock Exchange on June 26, 2020. REUTERS / Staff / File Photo

London, Paris and Frankfurt fell around 1

% in early trade as difficult conditions shifted investors back to the region’s dollar and government bonds.

Tokyo, Hong Kong and Seoul had all lost ground in Asian trade, while Shanghai’s soaring blue-chip index stuttered at the close after having contributed to last week’s 15% gains.

“Just as many parts of the world appeared to be coping with the corona virus pandemic, many jurisdictions have reintroduced bans to curb an increase in new cases,” said Pictet Asset Management chief strategist Luca Paolini.

He said companies’ earnings prospects are clearly worrying. The consensus is that after the deepest recession in more than a century, earnings worldwide will decline by about 20% this year, even though Pictet forecasts a 30% to 40% slump.

“However, this does not mean that the equity and corporate bond markets will fall sharply,” said Paolini, predicting that the Federal Reserve would add another $ 1.3 trillion this year and the ECB another 1.1 trillion Euro will add.

Analysts said signals from the Chinese government through a government-sponsored magazine on the importance of “promoting a healthy bull market”, released on Monday, had helped buy the latest binge in Chinese stocks.

The current China rally commemorates the past, especially in 2007 and the shopping spree after the crash in 2015, which was largely driven by Chinese private investors.

“Shades of John F. Kennedy’s inaugural speech,” Don’t ask what your country can do for you “here and as close as possible to a Chinese government, like everything the Fed has done to the US so far. ) Markets, ”said Ray Attrill, head of FX strategy at NAB, in a research note.

A strong recovery in US services activity in June, almost returning to pre-pandemic levels, also contributed to increasing investor risk appetite.

Graphics: ChiNext continues here

DEMAND DESTRUCTION

However, new coronavirus cases increased in several states, forcing some restaurants and bars to close again, which was a setback to the burgeoning recovery that helped control profits on high-risk assets.

Lockdown measures were also reintroduced in Australia’s second-largest city, Melbourne, on Tuesday, limiting residents to all travel that was not essential for another six weeks.

The Chinese yuan reached its highest level in almost four months in the currency market. The renminbi rose 0.1% to $ 7.0115 per dollar, although it was small compared to Monday’s jump of almost 1%.

“The yuan is underpinned by risk sentiment in the Chinese stock market despite ongoing uncertainty about US-China relations and an expected slow recovery,” said Ei Kaku, senior strategist at Nomura Securities.

Other major currencies struggled when the dollar picked up again. The yen remained unchanged at 107.41 against the dollar, the euro fell below USD 1.13 and down to USD 1.1275, while the Australian dollar fell 0.5% after the headlines broke over Melbourne’s blocking measures.

Gold fell slightly in metals, but still peaked at nearly eight years at $ 1,776 an ounce. Copper was also somewhat weaker in trading in London after hitting a new five-month high in Asia under the China fee.

Oil prices also struggled in line with most commodity markets. Brent crude lost nearly 1% to $ 42.69 a barrel, while US West Texas Intermediate crude fell to $ 40.24.

According to a Reuters balance sheet, 16 U.S. states reported record-breaking new COVID-19 cases in the first five days of July. Concerns about fuel demand in the world’s largest oil-consuming country are again worrying.

Florida is reintroducing some economic reopening limits to deal with rising cases. California and Texas, two of the most populous and economically important US states, also report high infection rates.

“The potential to destroy demand as lock reinstatement appears more likely is accompanied by concerns about OPEC + discipline to weigh on oil prices,” said Michael McCarthy, CMC Markets’ chief market strategist in Sydney, in one E-mail.

Graphic: The largest stock markets in the world since early 2020 here

Marc Jones reporting; Edited by Catherine Evans

Our standards:The Thomson Reuters Trust Principles.

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