European shares opened higher Tuesday after Asia tracked a retreat on Wall Street as investors grew jittery over the possibility that surging virus cases could stifle the global economic recovery. Benchmarks rose in Paris and London but fell in Asia. US futures were higher and the yield on the 10-year Treasury dropped to 1.18 per cent.
Alarm has been mounting in Japan where, with just three days to go before the Tokyo Olympics open, new coronavirus cases are being found among athletes and non-athletes affiliated with the Games.
The Japanese government has repeatedly promised a safe and secure Games, but just about 22 per cent of the Japanese population is fully vaccinated. The World Health Organisation says cases and deaths are climbing globally after a period of decline, spurred by the highly contagious delta variant.
France’s CAC 40 gained 0.4 per cent to 6,322.92, while Germany’s DAX rose 0.1 per cent to 15,150.96. Britain’s FTSE 100 added 0.3 per cent to 6,861.42. The futures for the Dow industrials and the S&P 500 were up 0.3 per cent.
In Asia, Tokyo’s Nikkei 225 slipped 1.0 per cent to finish at 27,388.16. South Korea’s Kospi shed 0.4 per cent to 3,232.70. Australia’s S&P/ASX 200 declined 0.5 per cent to 7,252.20. Hong Kong’s Hang Seng lost 0.8 per cent to 27,259.25, while the Shanghai Composite inched down nearly 0.1 per cent to 3,536.79.
Given how tightly connected the global economy is, flare-ups in COVID anywhere can quickly affect the rest of the world.
Even in the US, where the vaccination rate is higher than in many other countries, people in Los Angeles County must once again wear masks indoors regardless of whether they’re vaccinated following spikes in cases, hospitalisations and deaths.
Any worsening of virus trends threatens the high prices that stocks have achieved on expectations the economy will fulfill those lofty forecasts.
Besides the new variants of the coronavirus, other risks include fading pandemic relief efforts from the US government and a Federal Reserve that looks set to begin paring back its assistance for markets later this year.
This week brings a slew of earnings reports. Across the S&P 500, analysts are forecasting profit growth of nearly 70 per cent for the second quarter from a year earlier.
That would be the strongest growth since 2009, when the economy was climbing out of the Great Recession.
In energy trading, benchmark US crude rose 7 cents to USD 66.42 a barrel in electronic trading on the New York Mercantile Exchange. It sank USD 5.21 on Monday to USD 66.35.
Brent crude, the international standard, added 2 cents to USD 68.64 a barrel. In currency trading, the US dollar slipped to 109.41 Japanese yen from 109.46 yen. The euro fell to USD 1.1796 from USD 1.1802