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Asia and Europe sink, US rises as Q4 trading begins

·4-min read
Investors are worred about a possible US debt default (AFP/Angela Weiss)

Global stock markets started the fourth quarter with mixed results on Friday, as Wall Street recovered from recent losses but Asia and Europe saw little forward progress.

An array of worries have recently dogged global equities, including supply chain snarls, inflation, the Delta variant of Covid-19 and its effect on the economic recovery and, more recently, political gridlock in the United States that is pushing it closer to a potential debt default.

Wall Street posted solid gains on the first day of October trading, in what observers viewed as a positive reaction to news that pharmaceutical giant Merck would seek authorization in the United States for an oral drug against Covid-19 that performed well in clinical trials.

"This is something I think a lot of people and not just investors have been wanting is a cure for Covid," said Kim Forrest at Bokeh Capital Partners.

European markets had a choppy day, with London's FTSE 100 and Frankfurt's DAX both ending the session in the red, while the Paris CAC 40 finished just about steady. Asian markets saw heavier losses earlier in the day.

"The markets are likely to remain volatile as (the fourth quarter) begins, with October another historically choppy period after September's wild ride for the markets that saw the S&P 500 snap a seven-month winning streak," said analysts at Charles Schwab.

There was indeed reason to worry. The US Commerce Department's personal consumption expenditures price index was up 4.3 percent from August 2020 as the world's largest economy struggles with supply chain delays and shortages amid its bounceback from the pandemic's business closures.

Lawmakers in Congress on Thursday evening approved a measure to stop a US government shut down, but now they have just weeks to lift the debt limit and avert a default or face economic calamity.

"The news out of Washington hasn't been as encouraging," said Briefing.com analyst Patrick O'Hare.

- Inflation deflates sentiment -

In Europe, too, investors were concerned about soaring inflation.

Eurozone consumer prices surged in September by 3.4 percent on an annualized basis -- the fastest pace since 2008 -- as energy costs rocketed.

Most global central banks insist that the current inflation spike is temporary, but investors remain fearful that tighter monetary policy could further damage any post-Covid recovery.

The inflation news "probably has not helped general sentiment", Interactive Investor analyst Richard Hunter told AFP.

"Having said that, the European Central Bank is singing from the same song sheet as the other major central banks in assuming that the elevated level of inflation is transitory."

"Time will tell" whether the ECB would need "some tightening action in due course," he said.

Investors are preparing for the Federal Reserve to start tapering its massive bond-buying program before the end of the year.

An increase in government bond yields in the United States and Europe unnerved investors earlier this week.

All three main indexes on Wall Street ended in the red on Thursday, which was also the last session of the third quarter. The Dow and Nasdaq were lower for the quarter overall, while the S&P 500 posted a small gain.

In Asia, Tokyo lost 2.3 percent in Friday.

Sydney shed two percent despite news that Australia will begin to reopen its borders in November after 18 months of restrictions.

Hong Kong and mainland Chinese markets were closed for a holiday.

- Key figures around 2025 GMT -

New York - Dow: UP 1.4 percent at 34,326.46 (close)

New York - S&P 500: UP 1.2 percent at 4,357.04 (close)

New York - Nasdaq: UP 0.8 percent at 14,566.70 (close)

London - FTSE 100: DOWN 0.8 percent at 7,027.07 (close)

Frankfurt - DAX: DOWN 0.7 percent at 15,156.44 (close)

Paris - CAC 40: DOWN 0.04 percent at 6,517.69 (close)

EURO STOXX 50: DOWN 0.3 percent at 4,035.30 (close)

Tokyo - Nikkei 225: DOWN 2.3 percent at 0615 GMT (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Euro/dollar: UP at $1.1594 from $1.1580 at 2100 GMT on Thursday

Pound/dollar: UP at $1.3548 from $1.3474

Euro/pound: DOWN at 85.57 pence from 85.95 pence

Dollar/yen: DOWN at 111.02 yen from 111.29 yen

Brent North Sea crude: UP 1.1 percent at $79.17 per barrel

West Texas Intermediate: UP 1.0 percent at $75.74

dan-rfj-lth/spm/lc/cs/mdl

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