US equities slipped on Tuesday after disappointing consumer spending data added to worries about rising coronavirus infections.
The S&P 500 fell 0.4 per cent in mid-afternoon trade, a day after optimism about the prospect of a Covid-19 vaccine drove the benchmark to a closing high.
The tech-heavy Nasdaq Composite was 0.1 per cent lower, and tech giants such as Amazon and Tesla gained ground, as investors looked to a sector that has been among the few resilient pockets of the market throughout the crisis.
The moves followed the release of data showing that US retail sales grew at a much slower pace than expected in October, as Americans grappled with a resurgence in coronavirus cases. Retail sales rose 0.3 per cent, undershooting analysts’ expectations for a 0.5 per cent gain.
“There are warning signs that November and December will be tougher periods for US businesses,” said James Knightley, chief international economist at ING. “Covid-19 concerns, squeezed incomes and restricted mobility point to weaker consumer activity.”
Despite the mild declines, US stocks remained near their most expensive level since the dotcom boom and bust. The S&P 500 on Tuesday traded at 21.3 times the expected 2021 earnings of the 500 companies that make up the index.
Anxiety about the slowing economic recovery comes against the backdrop of fading fiscal support, since US lawmakers had been unable to agree on a renewed rescue package before November’s presidential election.
The price of government debt rose after the release of the retail data, taking the yield on the 10-year US Treasury down 0.04 percentage points to 0.87 per cent.
In Europe, equity markets also moved into the red as investor optimism about a potential Covid-19 vaccine ran up against the latest surge in infections. The region-wide benchmark Stoxx 600 index closed down 0.2 per cent while London’s FTSE 100 slipped 0.9 per cent.
Despite encouraging news on Monday about the efficacy of Moderna’s vaccine candidate — which followed a similar announcement last week from Pfizer and BioNTech — analysts warned it would be some time before a vaccine was widely available.
Given the logistical and regulatory hurdles drugs must clear, “the reality obviously is there’s still quite a long way to go before any of these [vaccines] are actually in a position where they’re going to be able to make a meaningful difference”, said Matthew Merritt, fund manager at Insight Investment.
Coronavirus infections have continued to rise globally, prompting the renewed imposition of lockdown measures that hit economies during the first wave. New restrictions will be implemented in Sweden next week, while a senior public official in the UK hinted that post-lockdown curbs in England might have to be stricter than anticipated.
Padhraic Garvey, regional head of research, Americas, at ING, said the “muted reaction” of currencies to the Moderna news “confirmed something we have suspected: the novelty is fading fast and investors likely have already included prospects of a vaccine in their economic outlook”.
Early gains for oil faded in the afternoon in London, with global benchmark Brent crude ultimately settling down 0.2 per cent to $43.75 a barrel.
The price of oil has rallied this month on hopes of a rebound in global consumption, but some analysts have warned the boost will take time to come through.
In the near term, the vaccine breakthroughs change little for oil, said Warren Patterson, head of commodities strategy at ING, adding that there was “still plenty of concern over the demand impact from the latest wave of Covid-19”.
Equities trading in Asia was muted. Japan’s Topix index rose 0.2 per cent while Australia’s S&P/ASX 200 added 0.2 per cent as trading resumed after an outage on Monday.
In China, where coronavirus infections have been largely contained, the onshore version of the renminbi strengthened 0.5 per cent against the dollar to Rmb6.5515, a level it had not reached since mid-2018.