Lockdown blues shove stocks, oil back into the red

LONDON: World stocks and commodity markets fell again on Thursday, after a return to national lockdowns in some of the Europe's biggest economies triggered the worst global selloff in months.

The European Central Bank said it would increase its support and US GDP scored a widely-predicted record bounce, but it wasn't enough to halt the rout that has wiped nearly 5% off equities this week.

Wall Street saw a mixed open and Europe's STOXX 600 shed another 0.4% to leave Frankfurt, Milan and Paris all heading for near 8% weekly drops which will be the steepest since the initial COVID panic of March.

Concerns hit commodities and the euro, too, with oil falling 5% to its lowest since June at under $38 a barrel and down over 10% for the week, and the euro dropping to under $1.17.

"What I think has changed in the last few days is the significant spikes in the virus in Europe and the US, especially the US" said Nikesh Patel, Kempen Capital Management's head of investment strategy.

As a result, "the W-shaped scenario for the economy has now become consensus in the market" rather than one where economies broadly stabilise.

French President Emmanuel Macron and German Chancellor Angela Merkel have ordered their countries back into coronavirus lockdowns, while cases are rising in 47 US states with patients overwhelming hospitals in parts of the country.

Economic data and the ECB meeting were the day's other main focus. Uncertainty about Tuesday's US election also kept traders on edge.

The Bank of Japan had made no changes to monetary policy settings overnight, as expected, though it trimmed its growth forecasts to reflect sluggish services spending during summer.

Investors also saw expect the ECB to hold off on new measures as well, but to hint at action in December, which is likely to keep a lid on the euro.

The common currency fell to a 14-day low against the dollar and a hundred-day low against the yen. It last bought just under $1.1690 compared with $1.20 at the start of last month.

"The risks surrounding the euro area growth outlook are clear tilted to the downside," ECB President Christine Lagarde told a news conference. "This largely reflects the recent resurgance in COVID-19 infections."

German government bonds, Europe's principal safe-haven assets, were still in demand, with their yields, which move inversely to price, near seven-month lows. Benchmark US 10-year yields had ticked up overnight to 0.787% but drifted back down to 0.774% in Europe.

RED OCTOBER RUMBLES ON

Global stock markets lost nearly $2 trillion on Wednesday, with volumes on the New York Stock Exchange up almost 40% to their highest level since September.

With results from some of the big COVID winners such as Apple, Amazon and Facebook to look forward to, technology stocks led the Nasdaq higher 1%. The Dow Jones Industrial and S&P 500 were more stuttering however, even after confirmation the US economy had rebounded at a 33% annualized rate last quarter .

Overnight, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.6%, led by Australia, down 1.6%, and South Korea, down 1%.

Japan's Nikkei fell just 0.4%, while Chinese blue chips rose 0.7% and the yuan led gains by Asian currencies against the dollar.

"Asia is not really partaking in this second or third wave story because it's got its COVID largely under control," said Rob Carnell, chief economist in Asia at Dutch bank ING.

Taiwan, which boasts Asia's best-performing currency, marked its 200th straight day without a local coronavirus transmission on Thursday.

Wall Street's "fear gauge", the Cboe Volatility Index surged on Wednesday to its highest level since June and implied currency volatility indicates that a wild ride is expected.

Back in the currency markets, the US dollar edged up and riskier currencies, especially those in oil producing countries, remained under pressure.

The dollar, which hit a nine-day high in the previous session, was up 0.3% against a basket of six currencies. The euro was near a three-month low versus Japan's yen after the Bank of Japan's subdued message on the economy.

The oil-sensitive Norwegian crown hit one-month lows versus both the dollar and euro,. The Russian rouble also came under pressure, touching its lowest versus the euro since early 2016.