(Updates after European markets open)
* World share index sees first 5-day fall since Feb 2020
* Dollar rises broadly by Japanese yen edges up
* Oil prices fall more than 2% after OPEC+ resolves spat
* Government bond yields burrow lower amid COVID angst
By Marc Jones
LONDON, July 19 (Reuters) - Risk-aversion ruled on Monday as
a surge in worldwide coronavirus cases pushed down bond yields
and left stocks facing their longest losing streak since the
pandemic first hit global markets 18 months ago.
The STOXX 600 slid 1.4% and London's FTSE
fell 1.3% as England scrapped COVID-19 restrictions even though
over 48,000 new cases were reported in Britain on Sunday.
Britain's health minister has also tested positive for the
virus.
Asia had seen Japan's Nikkei and Hong Kong's Hang
Seng drop 1.3% overnight too. Cases hit an 11-month high
at the weekend in Singapore. Thailand had its highest single-day
increase since the pandemic began and Sydney's construction
workers were told to down tools after cases rose there as well.
Wall Street futures were down 0.5% although it
was good news for those holding safe-haven government bonds
or the dollar, which climbed to a more than 3-month
high.
Natwest's Global Head of Desk Strategy, John Briggs, said
the chances of broader lockdowns being needed again were growing
and also China's economy was slowing, meaning a recent surge in
commodity prices could be peaking although oil is now expensive
enough to be a weight on many economies.
"Where all this comes out of the wash for me is that with
this narrative gaining traction, it is clearly more bullish for
the dollar," Briggs said.
He said that if COVID-19 cases rise again, factors to
consider include which countries have the highest vaccination
rates, what their appetite for social restrictions is and also
what their fiscal appetite is.
"The US comes out on top of all these," Briggs added. "We
are in a period of renewed US exceptionalism... So all this is
bullish for the USD."
China's supersized tech trio Baidu, Alibaba and Tencent sank
3% or more after a Shanghai court at the weekend posted a list
of "typical unfair competition cases" involving the companies.
PERMANENTLY CHANGED?
Oil prices sank more than 2% after the OPEC group of
producing nations overcame a recent spat and agreed to boost
output in a hastily arranged meeting on Sunday.
Brent crude was down $1.70 at a five-week low of
$71.85 a barrel. U.S. crude fell a similar amount to
$70.59 a barrel.
Global economic growth is beginning to show signs of fatigue
as many countries, particularly in Asia, struggle to curb the
highly contagious Delta variant of the novel coronavirus and
have been forced into some form of lockdown.
Investors are also worried about the spectre of elevated
inflation, which the market has long feared.
Economists at Bank of America downgraded their forecast for
U.S. economic growth this year to 6.5%, from 7% previously, but
maintained their 5.5% forecast for next year.
"As for inflation, the bad news is it's likely to remain
elevated near term," they said in a note, pointing to their
latest proprietary inflation meter, which remains high.
"The good news is ... we are likely near the peak, at least
for the next few months, as base effects are less favourable and
shortage pressures rotate away from goods towards services."
In bond markets, the move to safe-haven assets meant the
recent fall in yields continued. Germany’s 10-year bond yield
was at its lowest since late March at -0.369% ahead
of an ECB meeting this week. U.S. Treasury yields slipped to
1.265% and have fallen for 11 of the last 15 trading sessions.
Action in the currency market lifted the dollar 0.2%
against a basket of major currencies to 92.734.
But it failed to make ground against the Japanese yen - the
dollar/yen currency pair traded below the 110 yen per dollar
mark at 109.85, leaving the yen 0.2% higher on the day.
Britain's sterling hit a three-month low against the dollar
of $1.3712. After health minister Sajid Javid
tested positive for COVID-19, Prime Minister Boris Johnson and
finance minister Rishi Sunak went into quarantine.
"Despite rising vaccination rates, a return to pre-corona
normality seems questionable," Ulrich Leuchtmann, head of FX and
commodity research at Commerzbank, wrote in a research note.
(Editing by Timothy Heritage)
Aviva (AV.)