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GLOBAL MARKETS -World stocks drop on virus, stimulus angst; U.S. dollar shines

Thu, 15th Oct 2020 16:07

By Koh Gui Qing and Huw Jones

NEW YORK/LONDON, Oct 15 (Reuters) - Global stock markets
dropped on Thursday as investors shied from risk and sought safe
havens such as the U.S. dollar on fears that a resurgence in
coronavirus cases and a lack of more U.S. fiscal stimulus would
hobble the world economy.

An unexpected rise in the U.S. weekly jobless claims figures
further reinforced concerns that the U.S. economy may sputter if
government does not act soon to shore up growth, especially in
the face of a spike in COVID-19 cases in Europe.

The run of negative news dragged on European shares, which
were on course for their worst day in 3-1/2 weeks. Ongoing
difficulties in Brexit trade talks were also a dampener.

"Virus restrictions across Europe continue to sour
sentiment," wrote Win Thin and Ilan Solot, currency strategists
at BBH Global Currency Strategy, adding that a U.S. fiscal
stimulus package is "deader than Elvis."

"Now, the U.S. economy goes into the winter months without
much-needed fiscal stimulus," they wrote in a note.

The pan-European STOXX 600 skidded 2.2% to a near
two-week low, marking its biggest one-day fall in 3-1/2 weeks.
Markets in London and Paris fell 1.9% and 2.2%
respectively, and Frankfurt and Milan were
2.6%-2.9%.

U.S. investment bank Morgan Stanley was a bright
spot, beating expectations on Thursday by announcing a 26% jump
in third-quarter profit as its trading desks benefited from more
volatile markets during the pandemic.

But that was not enough to push U.S. stock indices into the
black, especially after Thursday's weekly U.S. jobless claims
figures showed a bigger-than-expected rise to 898,000 from
840,000 the previous week.

The S&P 500 fell 36 points, or 1%, to 3,452.75, while
the Dow Jones Industrial Average shed 267 points, or
0.9%, to 28,238.71. The Nasdaq Composite lost 171
points, or 1.5%, to 11,598.00.

In Asia, MSCI's broadest index of Asia-Pacific shares
lost 1.3% with Hong Kong and India
both down over 2% and Japan's Nikkei closing
down 0.5%.

The shift toward safety helped the U.S. dollar, a
traditional safe-haven asset. The greenback jumped 0.5%
against a basket of six major currencies to 93.871.

A firmer dollar dragged on the euro, which drooped
0.4% against the greenback to $1.1694. Sterling also
struggled, slipping 0.9% to $1.2896.

A two-day summit of European Union leaders starts on
Thursday as the EU and Britain continue their efforts to
overcome stumbling blocks including fishing rights and
competition safeguards to reaching a trade deal before British
Brexit transition arrangements end on Dec. 31.

Investors will tune into European Central Bank President
Christine Lagarde, who takes part in a debate on the global
economy at 1600 GMT as part of the IMF and World Bank's annual
meeting, which is being held virtually.

Traders' preference for safety also helped government bonds.
Germany's government bonds rallied to leave their
yields at their lowest level since the March spread of COVID-19
caused a global meltdown in stock markets and other riskier
assets. Ten-year U.S. Treasury yield edged
down to 0.7107%.

A firmer dollar weighed on gold, with spot gold down
0.2% at $1,896.51 per ounce.

Oil prices also fell as the renewed surge in the virus in
large parts of the world underpinned concerns about economic
activity.

Brent crude futures dropped 2.6% to $42.17 a barrel,
while U.S. West Texas Intermediate crude futures fell
2.9% to $39.87 a barrel.
(Reporting by Koh Gui Qing; Editing by Will Dunham)

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