European equities slipped in early trading on tuesday after donald trump returned to the white house following a period in hospital with coronavirus.
After a strong rally on monday, the region-wide stoxx europe 600 had pared back early losses to fall 0.1 per cent by mid-morning, while londons ftse 100 was down 0.3 per cent. energy was the regions best-performing sector, lifted by yesterdays strong rally in oil prices.
Across the atlantic, futures contracts tipped the benchmark s&p 500 to fall 0.2 per cent when wall street opens later, after us stocks rebounded to their highest level in a month on monday.
Mr trump stayed in hospital for three days where he received treatment typically reserved for more severe coronavirus cases. although he mused in a video message that he was better, his doctor cautioned that the us president was not yet out of the woods.
News of the presidents improving health helped drive equities higher worldwide on monday. but traders are weighing up a number of risks ahead of the us presidential election in november, including the worsening pandemic that has caused some countries to reinstate lockdown curbs.
Mondays exuberance was a relief rally but investors are now realising that thats not the end of all our problems, said luca paolini, chief strategist at pictet asset management. equities are likely to trade within a more limited range until there is more clarity about the outcome of the election and the extent of the us economic recovery, he added, pointing out that the improvement in weekly jobless claims had stalled.
Kit juckes, head of forex strategy at socit gnrale, said: president trump is back in the white house, but the markets attempt at a rally in risk assets rather ran out of steam in the early morning.
Brent crude, the international benchmark, gained more than 1 per cent to $41.78 a barrel, having risen 6 per cent on monday. the rally follows strikes in norway, western europes largest crude-producing nation, which threaten to curtail the countrys output.
Us government bonds were barely changed, with the yield on the 10-year note at 0.77 per cent, while the dollar was broadly flat against a basket of peers.
Negotiations about further fiscal stimulus measures are set to continue among us lawmakers, though investors are increasingly nervous about whether a package can be approved before the election.
If stimulus measures are not passed before the election and the outcome of the poll is contested, it could be some time before a package is approved, added mr paolini. a few months delay is not likely to be a severe blow to the economic recovery, but it would be psychologically difficult and dent confidence, he added.
However, sophie huynh, multi-asset strategist at socit gnrale, said that regardless of who won the poll monetary policy is going to remain easy, and fiscal is going to remain supportive.
In europe, official data from germany released on tuesday underscored that the regions economic powerhouse was faring better than its peers. new factory orders in germany rose faster than expected in august, prompting analysts at ing to say the countrys manufacturing sector could outpace services in the final quarter of the year.
But elsewhere in europe, purchasing managers indices and uk car sales data released on monday indicated that the regions recovery had slowed to a crawl.
In the asia-pacific region, equities moved broadly higher, extending mondays gains. japans topix climbed 0.5 per cent, hong kongs hang seng was up 0.8 per cent and south koreas kospi 200 rose 0.3 per cent.