NEW YORK, July 24 — European stocks gave up most of their early gains yesterday and Wall Street equities fell after US initial jobless claims pointed to renewed lockdowns taking a heavy toll on the stuttering economy.
The US Department of Labor reported that 1.4 million people applied for jobless benefits last week, the first week-over-week increase in claims since the early days of the Covid-19 crisis this spring.
“The recovery appears to be stalling as jobless claims rose for the first time since March and as continuing claims remain elevated,” said Edward Moya at OANDA, calling the data from the United States “downbeat.”
But on the upside, a less-than-solid US economy made further government stimulus more likely, just as another relief package was being negotiated between the White House and the Senate, Moya said.
The dollar fell following the data release.
Key European stock markets closed broadly unchanged, while Wall Street ended firmly lower.
Yesterday’s downward move in the US was led by technology giants such as Apple, Amazon and google parent Alphabet, all of which fell by more than three per cent.
Republicans have been struggling to come up with a bill to counter a US$3.5 trillion Democrat proposal, fanning concerns they will not pass a measure ahead of their August break.
‘Optimistic’
However, media reports said Republican Senate majority leader Mitch McConnell would soon unveil a US$1 trillion plan after overcoming some differences with the White House.
“Even as the Republicans and Democrats remain far apart on how much to spend in this next round of stimulus, the markets are optimistic that an agreement will be reached sooner rather than later,” said City Index analyst Fiona Cincotta.
“The prospect of both monetary and fiscal support taps running at the same time is keeping the mood in the market upbeat.”
Such hopes gave Asian and then European markets a lift earlier yesterday, outweighing coronavirus concerns and simmering China tensions.
Optimism over the development of a COVID-19 vaccine also sparked some buying.
Escalating tensions
Washington’s order to close the Chinese consulate in Houston a day after two Chinese nationals were indicted for allegedly hacking hundreds of companies worldwide seeking to steal vaccine research added to tensions between the two top economies.
China slammed the US move, and threatened retaliation, while Trump said “it’s always possible” more consulates could be closed.
“The escalation in US-China tensions is a reminder of the headline risk faced by investors during the upcoming US election campaign,” said AxiCorp’s Stephen Innes. — AFPnew york
