Shares Lose Footing, Oil Marches On

Equity markets slipped on Thursday on concerns about the long-term impact of the new coronavirus and simmering U.S.-China tensions, though those worries couldn’t stop oil prices from marching to a 2-1/2 month high, Reuters writes.

The London, Frankfurt, and Paris bourses and Wall Street futures were all 0.7%-1% lower in early trading, while the euro and pound both wilted as the dollar snapped a four-day losing streak.

It was also a big day for data and central bankers. Purchasing manager index surveys (PMIs) from Germany and France had already confirmed that economic activity has begun to return, though they were far from stellar.

Despite better-than-expected euro zone-wide figures Germany’s improvement undershot analysts’ forecasts, and it was the third month in a row that the surveys were firmly in economic contraction territory.

“While we have seen resilience in European markets there is still caution, and we can’t seem to get over the peaks (in equity markets) that we saw at the end of last month,” said CMC Markets’ senior analyst Michael Hewson. “We have got PMIs improving but you would expect that because lockdowns are being eased. They are still rubbish, they are just less rubbish than they were in April.”

Italy and Spain’s government borrowing costs also rose slightly as bond market investors waited for bond sales from both and for more details on a proposed 500 billion euro ($550 billion) EU coronavirus recovery fund.

The Franco-German driven plan would push the bloc in the direction of joint financing but has been met with resistance from a number of other northern European countries who want the aid to be in the form of loans to be repaid rather than grants.

The 10-year BTP yield was up 1.1 basis points at 1.64%, not far from the 1.59% low it touched on Tuesday, while Spanish yields rose 2.4 bps at 0.73%.

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