Europe stocks fall amid lockdown woes; bonds rise

Bloomberg

European stocks dropped on Tuesday as a planned lockdown in Germany amid a resurgence of virus cases cast doubt on the region’s nascent economic recovery.
The Stoxx 600 Index falls 0.5%, dragged lower by travel shares and cyclicals as Chancellor Angela Merkel put Germany into hard lockdown over Easter to try to defuse another wave of infections. The move come amid signs that progress against the pandemic is stalling as global deaths and cases creep higher. The euro slipped and regional bonds advanced.
Turmoil in Turkish assets continued in the wake of the central bank chief’s surprise dismissal over the weekend, with a drop in the main stock index triggering a circuit breaker. US equity futures retreated alongside most Asian stocks, while the dollar strengthened.
The 10-year US Treasury yield subsided further from the highest in about 14 months amid hopes of improved demand in this week’s heavy round of sales. The offerings include a seven-year note, a maturity that fared poorly in last month’s auction, sending benchmark yields sharply higher.
While a fresh lockdown in Europe’s largest economy is putting investors on the back foot, the stabilization in bond yields is providing some relief against fears that heavy U.S. spending could reignite inflation and force tighter central-bank policy. All eyes turn to Washington later today, where Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell will speak on the pandemic response.
“Risk assets can live with higher yields during the recovery stage,” just not an inflationary spike, said Dwyfor Evans, State Street Global Markets’ head of Asia-Pacific macro strategy. “We’re not there yet, so this is still really the beginning of this reflationary stage in terms of the business cycle — that’s what’s driving equities at the moment.”
Elsewhere, WTI crude oil dropped below $61 a barrel on concerns about the
near-term demand outlook.
Futures on the S&P 500 Index decreased 0.4% as of 8:19 am London time and the Stoxx Europe 600 Index dipped 0.5%.
While the MSCI Asia Pacific Index dipped 0.7%, the MSCI Emerging Market Index declined 0.7%.
The Bloomberg Dollar Spot Index jumped 0.3% and the euro falls 0.3% to $1.1902.
The British pound declined 0.2% to $1.3831 and the onshore yuan was little changed at 6.511 per dollar. The Japanese yen strengthened 0.1% to 108.76 per dollar.
The yield on 10-year Treasuries fall five basis points to 1.65% and the yield on two-year Treasuries dipped less than one basis point to 0.14%.
While Germany’s 10-year yield fell three basis points to -0.34%, Britain’s 10-year yield declined two basis points to 0.79%. Japan’s 10-year yield decreased less than one basis point to 0.082%.
West Texas Intermediate crude declined 1.6% to $60.58 a barrel and Brent crude dipped 1.6% to $63.60 a barrel. Gold weakened 0.1% to $1,737.83 an ounce.