Pfizer Vaccine Hopes Lift World Stocks; Dollar, Gold On The Defensive

Asian shares also managed to notch modest gains on Friday, even though shares in China and Japan posted slim declines. The MSCI Asia-Pacific share index rose 0.4%, while Japan’s Nikkei lost 0.4%.

Chinese stocks edged down 0.2%, but the main stock index was up for the week for the third consecutive week.

The improved mood on trading floors dented the U.S. dollar, usually perceived as a safe-haven asset. The dollar slipped 0.1% to 93.714 against a basket of six major currencies.

A softer dollar helped the euro regain some ground, with the common currency rising 0.1% to $1.1717.

Sterling was on the defensive after UK Prime Minister Boris Johnson told businesses to get ready for a no-deal Brexit in case negotiations with the European Union fail to produce a free trade agreement.

But assurances that Britain would continue to talk to European Union representatives early next week fed hopes that a deal could be reached. That gave sterling some reprieve, and it pared earlier losses to be up 0.1% at $1.2906.

Still, in a sign that the world economy is not out of the woods and investors are not unanimously upbeat about the outlook, oil prices fell on concerns that the spike in COVID-19 cases in Europe and the United States will curtail demand in two of the world’s biggest fuel-consuming regions.

“It’s a tug-of-war between risks that are well-flagged, the pandemic, the U.S. election, Brexit, and at the same time hope that these same risks can be resolved in matter of weeks or months”, said Emmanuel Cau, head of European equity strategy at Barclays.

Brent crude futures for December fell 0.6% to $42.91 a barrel and U.S. West Texas Intermediate crude futures for November delivery slid 0.4% to $40.8.

Also exposing market angst, Germany’s 10-year bond yield posted its biggest weekly drop since August and was hovering near a seven-month low of -0.63%.

Indeed, the demand for safe-haven government bonds is so robust that about 69% of the euro government bond market – worth just over 6 trillion euros – had negative yields in September, according to data from Tradeweb, a financial services company.

The 10-year U.S. Treasury yield edged up to 0.7406% on Friday as investors took comfort in data that showed U.S. retail sales rose more than expected in September, ignoring an outlook that analysts say is threatened by pervasive unemployment, and a lack of imminent fiscal stimulus.

Many investors now expect the U.S. government to only unveil additional fiscal stimulus after the Nov. 3 election.

Dimming prospects for a near-term U.S. stimulus, and the slight pull-back from safe-haven assets weighed on gold. Gold is seen as a hedge against inflation and has benefited from the loosening of global monetary and fiscal policies.

The price of spot gold dipped 0.3% to $1,901.61 per ounce.

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