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Stocks Rack up New Records while Dollar Weakens

On Friday, world stocks remained on course for their best month in history due to Joe Biden’s victory in the presidential elections, recent progress in coronavirus vaccines, a weak dollar, surge in commodity and hopes for further stimulus lifted the spirits. European markets did have a touch of caution due to a barrage of economic data and questions regarding the trial data of the COVID-19 vaccine by AstraZeneca, but this didn’t stop them from having the best November ever. Spain’s, Italy’s, France’s and Germany’s main bourses all recorded some gains and yield on government bonds remained low after the European Central Bank (ECB) reinforced expectations of introducing additional stimulus next month.

There was a small decline in London’s FTSE due to some last-minute nerves over Brexit, but with Wall Street indicating a rise post-Thanksgiving, the MSCI’s broadest world index was on course for an all-time high. Analysts said that risk sentiment was quite reasonable because there is easy money and vaccines coming in. However, overnight trading didn’t bring all good news. There was a decline of 0.5% in Australian shares and an 11.25% slump in Treasury Wine Estates, as China slapped Australian wines with new tariffs, in the latest move in the long-running trading spat between countries.

Nonetheless, there was still a 0.1% increase in China’s shares, after data indicated that industrial profits had increased at their fastest pace since 2017. Japan’s Nikkei and South Korean stocks increased by 0.3%, as well, but trading was quite choppy. Due to the reduced cost of the AstraZeneca coronavirus drug, the British drugmaker’s vaccine had been touted as one for the world. But, its efficacy is now being scrutinized and this might end up delaying its approval. A number of scientists have expressed their doubts about the results, which showed the effectiveness of 90% in participants, who had initially received a half dose in error, before being given a full dose.

Analysts said that there could be some economic scarring because global coronavirus cases exceeded 60 million, which means that global recovery will have to deal with a rough terrain. US hospitalizations due to the virus have also reached a record high and according to experts, there could be additional infections and deaths due to Thanksgiving gatherings. Even after the national lockdown will finish on December 2nd in England, more than 20 million people will still have to deal with the toughest restrictions. There have also been increased concerns about economic growth because some European countries have imposed partial lockdowns.

The chief economist at the European Central Bank highlighted these concerns and said that these increased financing concerns for small and medium-sized businesses. This drove European bond yields down even further. There was little reaction in the euro because currency traders have already incorporated expectations of additional easing by the ECB next month. The dollar also reached its lowest in the last three months after declining by 2.2%, as surging global sentiment has reduced the demand for the safe-haven currency. The euro-dollar will only break if there is good news about the Brexit trade deal, according to analysts. 

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