European stocks subdued amid rising COVID infections

·Contributor
·4 min read
Staff member at an NHS mobile vaccination and testing unit at Northumberland Retail Park as cases of the Indian-origin coronavirus variant continue to rise in Shiremoor, North Tyneside, England. Photo: Lee Smith/Reuters
Staff member at an NHS mobile vaccination and testing unit at Northumberland Retail Park as cases of the Indian-origin coronavirus variant continue to rise in Shiremoor, North Tyneside, England. Photo: Lee Smith/Reuters

Stocks in Europe had a muted day on Thursday, with the FTSE 100 (^FTSE) trading flat for most of the day amid concerns of rising COVID cases in Europe.

London's benchmark index ended 0.1% lower on the day, while the French CAC (^FCHI) closed 0.7% higher and the DAX (^GDAXI) was 0.3% lower.

It came as the number of reported coronavirus cases in the UK hit 3,180 on Wednesday, the first day above 3,000 cases in more than six weeks.

The British government has advised people to minimise travel in and out of eight local areas where the Indian variant is spreading fastest.

On the bloc, France announced fresh restrictions on UK passengers that will apply from 31 May. It requires that non-French citizens or residents should have an overwhelming reason to travel to the country, in addition to the existing requirement to produce a negative test and self-isolate for a week after arrival.

The move echoes the decisions this week by Germany and Austria to ban non-essential travel from the UK amid concerns about the Indian strain.

“The FTSE 100 seems to be on a road to nowhere at the moment,” said AJ Bell investment director Russ Mould. "Metal prices are also creeping higher again. This could put yet more focus on the risks of the global economy overheating but has at least given the UK mining sector a bit of a lift this morning."

Watch: COVID-19: Government backtracks on local lockdowns after travel confusion

Across the pond, the S&P 500 (^GSPC) rose 0.3% by the time of the European close and the Dow Jones (^DJI) edged 0.4% higher. The tech-heavy Nasdaq (^IXIC) climbed 0.2%.

It came as the US economy grew at a robust annual rate of 6.4% in the first three months of this year, unchanged from the government's initial estimate. Economist believe GDP growth could top 10pc in the current April-June quarter.

US jobless claims also sank to a fresh pandemic low for the past week, the third week running that unemployment claims have fallen. Jobless claims edged lower to 406,000 in the week ended 22 May. 

Stocks were also bolstered by an NYT report that president Joe Biden would propose a $6tn (£4tn) budget to boost infrastructure spending

On Wednesday, US equities and other risk assets made a modest recovery, with the S&P 500 up 0.2% as investor fears over inflation continued to subside and the global picture on the pandemic showed further signs of improvement. The move put the S&P back within 1% of its all-time high from earlier in the month.

Overnight, Asian shares were mixed as investors watched for signs of inflation. Some markets reversed early losses and hovered near two-week highs.

Chinese shares, which had started in the red, turned positive in the late afternoon session with the Shanghai Composite (000001.SS) up 0.4%, while the Hang Seng (^HSI) slipped 0.3%.In Japan, the Nikkei (^N225) lost 0.3%.

Australian shares were slightly higher on the day despite the state of Victoria going into a seven-day lockdown as a cluster of new COVID cases continues to grow. Meanwhile New Zealand's benchmark index ended lower, extending its losses for a second day in a row, after the country's central bank on Wednesday signalled rate rises from next year.

Read more: HSBC sells chunk of US retail banking operations in push for Asia

"Some of the week’s froth has come out of the markets in Asia today, with equities edging lower, along with energy and precious metals and our good friends, the cryptocurrency space, while the US Dollar edged higher after an impressive rally overnight," Jeffrey Halley, senior market analyst for Asia Pacific at OANDA, said.

"All the financial markets space, the price action looks corrective, rather than a structural turn, as short-term momentum ran out of the “inflation is dead, buy everything” that has swept markets this week."

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