Stocks Slump, Dollar Rebounds Amid Risk-Off Mood: Markets Wrap

(Bloomberg) — Investors are winding up the week doing risk-off trades, with U.S. stimulus talks hung up and coronavirus developments weighing on sentiment. The dollar rose the most in almost two weeks. European stocks fell more than 1%, as Germany said the continent’s biggest economy had record virus cases and deaths. Sanofi dropped on news that its Covid-19 shot failed to produce a strong enough response in older people. U.S. equity futures sank in the wake of stimulus talks stalling over shielding companies from virus lawsuits. The Cboe Volatility Index, which gauges expected price swings for the S&P 500, headed for the biggest weekly increase since the run-up to the November presidential election.

chart: Volatility has biggest weekly increase since run-up to November election © Bloomberg Volatility has biggest weekly increase since run-up to November election

“After the sharp increase in sentiment and positioning in November, continued rises in Covid-19 cases and lockdowns have started to weigh on risky assets,” said Christian Mueller-Glissmann, London-based head of asset allocation at Goldman Sachs Group Inc. “But with our constructive macro outlook for next year, we would not expect a deep correction but more of a consolidation.” Stock markets were choppy this week as the fate of an additional relief package in Washington remained unresolved as Democrats and Republicans continue to negotiate. A disappointing jobs report and a strong 30-year auction of Treasuries on Thursday signaled investor caution over whether fresh economic stimulus will come before year-end. The European Central Bank escalated its efforts to shield the region from a possible double-dip recession with another burst of monetary stimulus, while cautioning that it may not use up all the new firepower. Nick Note: I do not believe this is the end of the bull run. I do believe the market is fretting over the happy check stimulus bill stalling. I still believe their will be a stimulus bill and a vaccine launch and the Republicans will keep control of the senate in the Georgia run off.