LONDON, Nov 22 Reuters World stocks kicked off the week on a cautious note on Monday after posting a second weekly drop, and the euro struggled as traders weighed the risks of European lockdown restrictions and the possibility of a faster Federal Reserve taper.
Major European indexes opened in the red as markets seemed to have suddenly woken up to COVID 19 risks, as Wall Street futures held comfortably in positive territory in early London trading.
The spread of Covid 19 in Europe means more lockdowns and other health restrictions against the non-vaccinated should increase in the next two weeks, according to Sebastian Galy, a strategist at Societete Generale.
That should have a negative impact on some services and negatively impact on growth, a scenario that had been priced into the European equity market. Austria shut down its public life on Monday as it began its fourth national COVID 19 lockdown, the first in a western European country, with Germany warning it may follow suit. Equity analysts have been keeping their bullish European stock market recommendations for now, but investors are watching sectors such as travel, hotels and banks for wider impact. The travel and leisure index was the top decliner in early trading.
The broadest index of Asia-Pacific shares outside Japan fell by 0.1%. An Asian gauge was down by a similar margin.
The euro fell 0.3% to $1.1260, close to a 16 month low on Friday. The common currency has been a major mover in markets over recent sessions as investors bet that Europe's economy will lag the U.S. recovery.
On the corporate front, shares in Telecom Italia went up 30% after KKR made a $12 billion approach to take the Italian phone group private. Since March, the telecom sub-index has gained by its biggest margin.
Safe-haven assets such as bonds, gold and the yen have also benefitted from the recent cautious tone.
The yield on the benchmark 10 year U.S. Treasuries was steady at 1.5600% on Monday, with the yield curve at its lowest level since the epidemic began as markets were worried about the possibility of a quicker unwinding of stimulus.
Richard Clarida, Fed Vice Chair, said last week that quickening the pace of tapering might be worth discussing at December's meeting. The minutes for the November meeting are due Wednesday.
Safe-haven assets attracted demand. Gold found support at $1,845 an ounce. The yen hovered at 114.09 per dollar.
After posting its worst week in two months last week, it fell 3% to $57,000.