Connect with us

Economy

Global rally fades, but investors' hopes remain for economy – OrilliaMatters

Published

 on


NEW YORK — Stocks downshifted on Tuesday, a day after their powerful worldwide rally, but optimism remained high that the global economy may still be headed for a return to normal.

It was the second straight day that rising hopes for a COVID-19 vaccine pushed investors to reorder which stocks they see winning and losing, and the continuing revamp left the majority of U.S. stocks higher but indexes mixed. Treasury yields and oil, meanwhile, held onto their big gains from a day earlier or added some more amid strengthened confidence in the economy.

The S&P 500 dipped 4.97 points, or 0.1%, to 3,545.53, after erasing most of an early loss. The relatively small movement, though, belied a lot of churning underneath. Nearly two out of three stocks in the index climbed, while losses for some of the largest and most influential technology stocks offset them.

The Dow Jones Industrial Average gained 262.95 points, or 0.9%, to 29,420.92, and the Nasdaq composite dropped 159.93, or 1.4%, to 11,553.86.

The flashpoint for all the moves was Monday’s announcement from Pfizer that a potential COVID-19 vaccine it’s developing with German partner BioNTech may be 90% effective, based on early but incomplete test results.

“This was such an environment of exuberance, which makes sense given some pretty compelling statistics” about immunity response for the vaccine candidate, said Kristina Hooper, chief global market strategist for Invesco. “But there are still a number of steps between now and distribution.”

Stocks of smaller U.S. companies, which tend to move more with expectations for the economy than their bigger counterparts, rallied again. The Russell 2000 index of small-cap stocks gained 31.97, or 1.9%, to 1,737.01 and finally climbed back above where it was in January. It’s just 0.2% below its record high, which was set in 2018.

Several areas of the market that got beaten down through the pandemic and whose low prices make them look like potentially better values led the way. Energy stocks in the S&P 500 rose 2.5% for the best gain among the 11 sectors that make up the index, for example, though they’re still down nearly 44% for 2020.

“We’re seeing a continuation of this value trade that really took off in earnest yesterday,” said Brian Price, head of investment management for Commonwealth Financial Network. “We’re seeing follow through today, which is good news for those who have maintained a diversified portfolio.”

But he said there needs to be more economic growth for a sustained recovery by many of the companies and sectors beaten down by the virus pandemic.

The Big Tech stocks that carried the stock market through the pandemic, meanwhile, are suddenly facing more scrutiny for their high prices. Their stocks soared through 2020 on expectations they’ll continue to thrive if the economy is in lockdown mode. But that’s left their prices looking too expensive to critics, even after accounting for their huge profits.

Amazon, which is one of those Big Tech stay-at-home winners, fell 3.5%. It also is facing antitrust charges filed by European Union regulators on Tuesday that accuse it of using its access to data to gain an unfair advantage over merchants using its platform.

Microsoft fell 3.4%, and Facebook lost 2.3%. Those drops have outsized effects on the S&P 500 because they’re some of the largest companies in the index by market value.

The S&P 500 is already up 8.4% in November so far. Not only are hopes for a coronavirus vaccine helping to lift markets, so is clearing uncertainty about who will control the government next year.

Democrat Joe Biden over the weekend clinched the last of the electoral votes needed to become the next president. Republicans, meanwhile, appear likely to keep control of the Senate.

That’s a “Goldilocks” scenario for many investors because it could mean low tax rates and other pro-business policies remain, while a more stable and predictable set of policies comes out of the White House. More than anything, though, a Biden win would wipe out the uncertainty that dogged the market through the long, vicious fight for the White House.

But analysts warn many risks still hang over the market, which could easily upend all the gains made in the last couple weeks.

The biggest may be whether investors have become too convinced about a potential COVID-19 vaccine. While early results are encouraging, no vaccine is about to go on the market, and there’s no guarantee that one will or the timing of it.

Coronavirus counts, meanwhile, continue to surge at worrying rates across Europe and the United States. It’s troubling enough in Europe that several governments have brought back restrictions on businesses.

And uncertainty could easily swamp Washington again. President Donald Trump has refused to concede and is blocking government officials from co-operating with Biden’s team. Some Republicans, including Senate Majority Leader Mitch McConnell, are rallying behind Trump’s efforts to fight the election results.

The Republican control of the Senate that markets seem to be so heavily banking on also depends on the outcome of a pair of runoff elections in Georgia in January.

Still, optimism remains across markets.

The yield on the 10-year Treasury held steady at 0.95% and remains close to its highest level since March. Benchmark U.S. crude oil rose 2.7% to settle at $41.36 per barrel.

European markets rose, while Asian markets ended modestly higher.

___

AP Business Writer Joe McDonald contributed.

Stan Choe And Damian J. Troise, The Associated Press

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Euro zone economy to gain momentum in 2021 on vaccine hopes: Reuters poll – The Journal Pioneer

Published

 on


By Richa Rebello and Manjul Paul

BENGALURU (Reuters) – The euro zone economy will contract again this quarter as renewed lockdown measures stifle activity, according to a Reuters poll which showed the bloc’s GDP would then return to pre-crisis levels within two years.

Hopes for a coronavirus vaccine and additional support from the European Central Bank this month meant quarterly growth forecasts for next year were upgraded in the poll conducted from Nov. 26-Dec. 2.

“We now assume vaccines will be rolled out in the euro zone next year and most restrictions on economic activity are lifted during Q2. As a result, GDP increases by around 5% next year, regaining its pre-COVID level in early 2022,” said Andrew Kenningham, chief Europe economist at Capital Economics.

“There are still big risks to this forecast. There could yet be a third wave of the virus, vaccine distribution could run into political or logistical problems, and governments could be slower to ease restrictions. On the other hand, the vaccines could be more effective or easier to roll out than anticipated”.

Nearly 80% of respondents, or 36 of 45, who replied to an extra question said the economy would return to pre-crisis levels within two years.

That was a major turnaround in expectations from August when more than 70% of economists said it would take two or more years to reach that level.

The wider poll showed after contracting 2.6% this quarter, the economy would grow 1.1% in the first quarter of 2021 compared with 0.8% in the last poll. It was then predicted to expand 2.0% and 1.8% in Q2 and Q3, better than median predictions of 1.8%, 1.2% in November.

On an annual basis, the economy was expected to shrink 7.4% this year, and grow 5.0% in 2021 largely unchanged from the last poll. For 2022, the growth forecast was upgraded to 3.5% from 3.1%. (Graphic: Reuters Poll: Euro zone economy and ECB monetary policy outlook, https://fingfx.thomsonreuters.com/gfx/polling/xlbvgzaxjpq/Reuters%20Poll%20-%20ECB%20and%20EZ%20outlook%20-%20December%202020.PNG)

That pick-up in growth will not filter through to inflation which was expected to remain far below the European Central Bank’s target of just below 2%, averaging 0.3% in 2020. 0.9% in 2021 and 1.3% in 2022.

Having remained in negative territory for the fourth straight month in November, inflation is likely to be a point of focus when the ECB’s Governing Council meets next week.

The ECB has launched a strategic review after years of inflation undershooting its target and nearly 80% of respondents to an extra question, or 33 of 43 economists, said the ECB would change its inflation target.

While a smaller section of poll participants commented on what the target would be, most said the ECB would allow more leeway around 2% or adopt an average inflation targeting framework, similar to the Federal Reserve’s recent policy.

“We are probably going to see something which looks a little bit similar to the Fed in the sense that this will be more of a symmetrical target. By changing to a symmetrical target, you build in a little more tolerance for higher inflation in the future,” said Elwin de Groot, head of macro strategy at Rabobank.

“This cements the idea rates will stay very low in the coming years… but the past ten years suggest these very relaxed policy settings are not sufficient to really create more growth and inflation. What you really need is a combination of monetary and fiscal policy.”

The ECB was expected to top up its pandemic-related bond purchases by 500 billion euros, at its Dec. 10 meeting, extending the programme by six months until December 2021, a Nov. 18 poll found. It was also predicted to change the terms of its targeted long-term loans to financial institutions.

(Reporting by Richa Rebello and Manjul Paul; Polling by Tushar Goenka and Hari Kishan; Editing by Jonathan Cable and Toby Chopra)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Euro zone economy to gain momentum in 2021 on vaccine hopes: Reuters poll – TheChronicleHerald.ca

Published

 on


By Richa Rebello and Manjul Paul

BENGALURU (Reuters) – The euro zone economy will contract again this quarter as renewed lockdown measures stifle activity, according to a Reuters poll which showed the bloc’s GDP would then return to pre-crisis levels within two years.

Hopes for a coronavirus vaccine and additional support from the European Central Bank this month meant quarterly growth forecasts for next year were upgraded in the poll conducted from Nov. 26-Dec. 2.

“We now assume vaccines will be rolled out in the euro zone next year and most restrictions on economic activity are lifted during Q2. As a result, GDP increases by around 5% next year, regaining its pre-COVID level in early 2022,” said Andrew Kenningham, chief Europe economist at Capital Economics.

“There are still big risks to this forecast. There could yet be a third wave of the virus, vaccine distribution could run into political or logistical problems, and governments could be slower to ease restrictions. On the other hand, the vaccines could be more effective or easier to roll out than anticipated”.

Nearly 80% of respondents, or 36 of 45, who replied to an extra question said the economy would return to pre-crisis levels within two years.

That was a major turnaround in expectations from August when more than 70% of economists said it would take two or more years to reach that level.

The wider poll showed after contracting 2.6% this quarter, the economy would grow 1.1% in the first quarter of 2021 compared with 0.8% in the last poll. It was then predicted to expand 2.0% and 1.8% in Q2 and Q3, better than median predictions of 1.8%, 1.2% in November.

On an annual basis, the economy was expected to shrink 7.4% this year, and grow 5.0% in 2021 largely unchanged from the last poll. For 2022, the growth forecast was upgraded to 3.5% from 3.1%. (Graphic: Reuters Poll: Euro zone economy and ECB monetary policy outlook, https://fingfx.thomsonreuters.com/gfx/polling/xlbvgzaxjpq/Reuters%20Poll%20-%20ECB%20and%20EZ%20outlook%20-%20December%202020.PNG)

That pick-up in growth will not filter through to inflation which was expected to remain far below the European Central Bank’s target of just below 2%, averaging 0.3% in 2020. 0.9% in 2021 and 1.3% in 2022.

Having remained in negative territory for the fourth straight month in November, inflation is likely to be a point of focus when the ECB’s Governing Council meets next week.

The ECB has launched a strategic review after years of inflation undershooting its target and nearly 80% of respondents to an extra question, or 33 of 43 economists, said the ECB would change its inflation target.

While a smaller section of poll participants commented on what the target would be, most said the ECB would allow more leeway around 2% or adopt an average inflation targeting framework, similar to the Federal Reserve’s recent policy.

“We are probably going to see something which looks a little bit similar to the Fed in the sense that this will be more of a symmetrical target. By changing to a symmetrical target, you build in a little more tolerance for higher inflation in the future,” said Elwin de Groot, head of macro strategy at Rabobank.

“This cements the idea rates will stay very low in the coming years… but the past ten years suggest these very relaxed policy settings are not sufficient to really create more growth and inflation. What you really need is a combination of monetary and fiscal policy.”

The ECB was expected to top up its pandemic-related bond purchases by 500 billion euros, at its Dec. 10 meeting, extending the programme by six months until December 2021, a Nov. 18 poll found. It was also predicted to change the terms of its targeted long-term loans to financial institutions.

(Reporting by Richa Rebello and Manjul Paul; Polling by Tushar Goenka and Hari Kishan; Editing by Jonathan Cable and Toby Chopra)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Canadian dollar strengthens as economy grows at a record pace – The Globe and Mail

Published

 on


The Canadian dollar strengthened against its U.S. counterpart on Tuesday as the greenback broadly declined and domestic data showed the economy growing at a record pace in the third quarter.

Canada’s economy grew by 40.5 per cent on an annualized basis in the third quarter, rebounding from a historic plunge in the second quarter, as businesses and stores reopened from COVID-19 lockdowns, Statistics Canada said.

Separate data, from IHS Markit, showed that Canadian manufacturing activity expanded for the fifth straight month in November as output and new orders climbed.

Story continues below advertisement

The U.S. dollar fell against a basket of major currencies on growing speculation that the Federal Reserve will act to support the economy through a tough winter as coronavirus cases rise.

Canada is also seeing a surge in infections. On Monday, Ottawa projected the budget deficit would hit a historic C$381.6 billion on COVID-19 emergency aid.

The Canadian dollar was trading 0.4 per cent higher at 1.2953 to the greenback, or 77.20 U.S. cents, having traded in a range of 1.2942 to 1.3006.

On Monday, the loonie notched its strongest intraday level in over two years at 1.2919. It ended November up 2.4 per cent.

The price of oil, one of Canada’s major exports, fell on Tuesday as investors awaited direction from OPEC and its allies after the producers postponed a formal meeting to decide whether to lift output from January. U.S. crude prices were down 0.8 per cent at $44.99 a barrel.

Canadian government bond yields were higher across a steeper curve in sympathy with U.S. Treasuries as Wall Street rallied. The 10-year was up 2.9 basis points at 0.709 per cent.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Let’s block ads! (Why?)



Source link

Continue Reading

Trending