US equities slipped on Tuesday after disappointing consumer spending data added to worries about rising coronavirus infections.
The S&P 500 fell 0.7 per cent in early trading, a day after optimism about the prospect of a Covid-19 vaccine drove the benchmark to a record closing high.
The tech-heavy Nasdaq Composite fell a more modest 0.3 per cent, while 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.
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.
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 deal before November’s presidential election.
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 was down 0.7 per cent by lunchtime, while London’s FTSE 100 slipped 1.6 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”.
In commodities markets, oil prices lost their early gains, with Brent crude, the international benchmark, down 1.1 per cent at $43.37 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.
“Developments with regards to a vaccine are constructive for oil demand in the medium to long term,” said Warren Patterson, head of commodities strategy at ING. “However, for the near term it changes little, with still plenty of concern over the demand impact from the latest wave of Covid-19.”
Equities trading in Asia earlier in the day 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 by 0.5 per cent against the dollar to Rmb6.5515, a level it has not reached since mid-2018.