LONDON, Nov 19 Reuters -- Concerns over China's slowing growth and a spike in COVID 19 cases in Europe stymied the global equity markets rally on Friday, with stocks struggling to hold onto recent record highs and the euro looking on track for a second straight week of losses.
The optimism faded noticeably in the Asian session as the regional index fell 1% for the week, despite consumer discretionary and tech sectors closing at a record high on Thursday.
European stock indexes edged higher in early London trading on Friday, although sentiment was more cautious with a European stock market volatility gauge holding near two-week highs.
After a series of heady gains in the dollar and front-end bond yields in recent weeks, the markets are consolidating and investors will focus their attention on the preliminary PMI data next week, said Kenneth Broux, FX strategist at Societete Generale in London.
We are going to pay more attention to whether or not the new Covid restrictions have an impact on services activity in the eurozone, rather than in the case of inflation. Inflation in Europe is less than in the United States with a surge in COVID 19 cases weighing on sentiment, but the high frequency data in recent weeks shows that economic activity is struggling as inflation has surged.
Europe has become the centre of the epidemic, prompting some countries including Austria and Germany to reintroduce restrictions in the run-up to Christmas and sparking debate over whether vaccines alone are enough to tame COVID - 19.
There are more daily new cases as a share of the population than in the United States, catching up with the UK and close to the numbers in Eastern Europe, according to Capital Economics.
The broadest gauge of world stocks held less than 0.5% less than a record high earlier this month, although Asia-Pacific shares are poised for a weekly decline of 1%.
Hong Kong shares fell more than 1%, dragged down by index heavyweight Alibaba after the Chinese e-commerce firm's shares fell more than 10% as it missed expectations due to slowing consumption, increasing competition and a regulatory crackdown.
After a recent slowdown in Chinese retail data, the numbers of Alibaba sparked concerns about a broader slowdown in the recovery of the world's second largest economy.
Sentiment was downbeat in currency markets with the dollar versus its major rivals going up 0.3% on the day while the euro held near six-year lows against the Swiss franc.
The European Central Bank will raise interest rates in order to counter rising inflation, and the single currency is on the receiving end this week. The euro is down more than 1% this week against the U.S. dollar, the second consecutive weekly drop.
The U.S. benchmark Treasury yields were below the 1.60% level, with investors waiting for news on the next Federal Reserve chief announcement in the coming days.
Turkey's lira lingered near Thursday's record low. The lira was weakened by 6% after the central bank cut rates again in order to take the benchmark to 15% even though inflation closes in on 20%.
The recent volatility of oil prices was continued. U.S. crude rose by 0.96% to $79.77 a barrel. Brent crude rose by 0.97% to $82.03 per barrel.
The price of the digital currency is 20% below its recent record highs, despite the fact that it is headed for its worst week in six months.