Global stock markets rebounded on Monday as investors bought up stocks after a significant drop last week while the dollar was down from its recent highs, but with politics and coronavirus coming to the fore this week, analysts said that this trend can quickly disappear.
In Europe, banks and airlines were among the top gainers, with HSBC leading an increase of 8% on the day after its largest shareholder, Chinese financial group Ping An Asset Management, said it increased its stake in the group, according to the FT.
As Covid-19 cases register new big increases in Spain, the UK, France and Belgium, the backdrop for the stock market is far from rosy. The Stoxx 50 index will fall 1.1% in the three months from July to September, which will lead to its worst performance in the third quarter since 2011, in the midst of the eurozone debt crisis.
“The main concern in Europe continues to be the rise in infection rates in many countries and the associated targeted isolation measures that threaten to stall an already periodic recovery,” said Mark Ostwald, world chief economist at ADM Investor Services.
The Frankfurt DAX rose 2.4%, while the London FTSE 100 rose 1.2%, reflecting gains in Asian markets, where the Nikkei closed 1.3% and Seoul's KOSPI rose 1.1%.
In addition to the growing number of Covid-19 cases, investors will be watching this week's final Brexit talks between the United Kingdom and the European Union, as well as the first presidential debate between Republican Donald Trump and Democrat Joe Biden.
TD Securities' emerging markets strategist Mitul Kotecha told CNBC on Monday that the debate likely overshadowed even Friday's key monthly US employment report.
"Politics will increasingly be in the spotlight of investors as the first presidential debate will take place in the United States tomorrow," said Jim Reed, strategist at Deutsche Bank.
“By staying in politics, we will see the resumption of Brexit negotiations between the UK and the EU. In terms of data, key factors will be Friday's US employment report and Thursday's global manufacturing PMIs, ”Reed said.
US futures indicated a positive start for stocks on Wall Street later that day. S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 1.25%, suggesting that the broader index continued to rise 2.2% last week.
Amid the rebound in shares, the dollar index fell from two-month highs, mainly due to the growth of the Japanese yen, which rose 0.25% over the day.
Concerns over rising rates of Covid-19 infection and its impact on the economy, coupled with nervousness over the upcoming US elections and weakening expectations of any immediate new US fiscal stimulus, have driven the dollar index up more than 2% this month. ... , ushering in the largest monthly gain in 14 months.
"With little prospect of US fiscal stimulus coming soon (Democrats and Republicans still strongly disagree on additional support) and growing concerns about widening restrictions in Europe, it is difficult to expect the dollar to resume its decline quickly," said strategist ING Christ Turner. "DXY closed above 94.75, which should alert dollar bears."
Gold fell 0.6% to $ 1,855 an ounce, while silver fell 1.2% to $ 22.83 an ounce. Usually, weakness in the dollar leads to a strengthening of precious metals, but almost without anticipating the acceleration of the fall of the American currency on Monday, gold and silver were taken by surprise.
“The dollar's strength these days is simply undermining demand for gold, as the market prefers the comfort of tech stocks when Covid rallies,” said AxiTrader chief market analyst Stephen Innes.