Global shares stabilize, but rising COVID cases across Asia and weaker UK GDP keep investors cautious
- Global shares stabilized on Friday after Thursday's sell-off, but investor remained wary.
- Rising COVID-19 cases, especially in Asia, along with new lockdowns across the region hit sentiment.
- The UK economy grew by just 0.8% in May, below expectations, but London-listed shares rallied.
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Global shares stabilized on Friday after a broad equities sell-off in the US the previous day, but rising COVID-19 cases especially in Asia and less bullish economic data for the UK kept gains in check.
S&P 500 futures were last up by 0.24%, Nasdaq futures gained 0.15% and Dow Jones futures were up 0.33% at 04:10 am E.T. on Friday. The respective indices had all closed lower on Thursday. Financials, industrials, and materials led the sell-off that hit sectors linked closely to the economy especially hard.
Rising COVID-19 cases around the world have triggered a series of lockdowns and restrictions on movement.
"The buy-the-dip strategy that has worked so well during the pandemic will soon be tested. Investors initially hit the sell button as growth forecasts for the remainder of the year got slashed as several parts of the world continues to struggle with the fight against COVID-19." Edward Moya, senior market analyst at OANDA said. " A month ago, everyone was thinking the US economy could grow between 8-10%, now that has come down closer to 6%." he continued.
The yield on the US 10-year Treasury note was last at 1.333%, up 3.5 basis points after falling for the past eight days and reaching levels last seen in mid-February on Thursday.
Asian equity markets had a mixed session on Friday as COVID-19 cases in the region continue to rise and lockdown restrictions are extended or sharpened, dampening investor spirits and hopes of a soon-to-come economic rebound.
Reuters had reported that US President Biden will add ten or more Chinese entities to the US' economic blacklist over human rights violations. At the same time, the reading of June's producer price index data for China was in line with expectations, while consumer price index data fell slightly short.
The Shanghai Composite closed 0.4% down while Tokyo's Nikkei 225 fell by 0.63% after the government said spectators would not be allowed at the Olympic games taking place this summer in Tokyo. Hong Kong's Hang Seng index gained 0.62%.
European markets did not follow this sentiment and rose after opening on Friday. Frankfurt's DAX was last up by 0.72%, the Euro Stoxx 50 had gained 1.07% and London's FTSE 100 climbed by 0.64%.
The UK economy grew by 0.8%, much less than the expected 1.7%, in May, GDP data released on Friday showed.
"The lower than expected GDP number should not really change the outlook for UK assets. The continued expansion should be a positive for equity markets, and we maintain a cyclical exposure to sectors such as industrials, financials and consumer cyclicals." Willem Sels, chief investment officer for HSBC private banking and wealth management said.
Oil prices climbed on Friday, with Brent crude futures rising 0.77% to $74.69 per barrel and WTI crude climbing 0.93% higher to be priced at $73.62 per barrel after a mixed week that was dominated by the fallout from the impasse within the OPEC+ producer group over its crude supply policy.
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