NEW YORK – Global stock markets started the fourth quarter with mixed results yesterday, with Wall Street recovering from recent losses, but Asia and Europe seeing little forward progress.
An array of worries has recently dogged global equities, including supply-chain snarls, inflation, the Delta variant of Covid-19 and its effect on the economic recovery, and more recently, political gridlock in the United States that is pushing it closer to a potential debt default.
Wall Street posted solid gains on the first day of October trading, in what observers viewed as a positive reaction to news that pharmaceutical giant Merck will seek authorisation in the US for an oral drug against Covid-19 that performed well in clinical trials.
“This is something that I think a lot of people, and not just investors, have been wanting: a cure for Covid-19,” said Kim Forrest at Bokeh Capital Partners.
European markets had a choppy day, with London’s FTSE 100 and Frankfurt’s DAX both ending the session in the red, while the Paris CAC 40 finished just about steady. Asian markets saw heavier losses earlier in the day.
“The markets are likely to remain volatile as (Q4) begins, with October another historically choppy period after September’s wild ride for the markets that saw the S&P 500 snap a seven-month winning streak,” said analysts at Charles Schwab.
There is indeed reason to worry. The US Commerce Department’s personal consumption expenditure price index was up 4.3% from August last year, as the world’s largest economy struggles with supply-chain delays and shortages amid its rebound from the pandemic’s business closures.
Congressional lawmakers on Thursday evening approved a measure to stop a US government shutdown, but now, they have just weeks to lift the debt limit and avert a default or face economic calamity.
“The news out of Washington hasn’t been as encouraging,” said Briefing.com analyst Patrick O’Hare.
Inflation deflates sentiment
In Europe, too, investors are concerned about soaring inflation.
Eurozone consumer prices surged last month by 3.4% on an annualised basis – the fastest pace since 2008 – as energy costs rocketed.
Most global central banks have insisted that the current inflation spike is temporary, but investors remain fearful that tighter monetary policy may further damage any post-coronavirus recovery.
The inflation news “probably has not helped general sentiment”, Interactive Investor analyst Richard Hunter told AFP.
“Having said that, the European Central Bank (ECB) is singing from the same song sheet as the other major central banks in assuming that the elevated level of inflation is transitory.
“Time will tell” whether ECB will need “some tightening action in due course”.
Investors are preparing for the Federal Reserve to start tapering its massive bond-buying programme before the end of the year.
An increase in government bond yields in the US and Europe unnerved investors earlier this week.
All three main indices on Wall Street ended in the red on Thursday, which was also the last session of Q3. The Dow and Nasdaq were lower for the quarter overall, while the S&P 500 posted a small gain.
In Asia, Tokyo lost 2.3% yesterday.
Sydney shed 2% despite news that Australia will begin to reopen its borders in November after 18 months of restrictions.
Hong Kong and mainland Chinese markets were closed for a holiday. – AFP, October 2, 2021
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