US stocks drop as virus cases rise; gold rallies

Reuters NEW YORK | Updated on January 05, 2021

US stocks dropped more than 1 per cent on Monday, pulling back from record highs in the first trading day of the new year as coronavirus cases surged, while the US dollar edged up and gold rallied.

Stocks hit record highs early in the New York session as investors focused on the roll-out of COVID-19 vaccines. But sentiment quickly turned cautious over the path of the virus,which continues to spread amid the discovery of a new variant.

The outcome of runoff elections on Tuesday in Georgia for two US Senate seats added to the nervousness.

"Investors are feeling a bit nervous on the first trading day of the new year, and I think this is a confluence offactors," said Lindsey Bell, chief investment strategist at Ally Invest, in Charlotte, North Carolina.

MSCI's All-Country World Index, which tracks stocks across 49 countries, was down 0.5 per cent after earlier hitting a record.

The Dow Jones Industrial Average fell 382.59 points,or 1.25 per cent , to 30,223.89, the S&P 500 lost 55.42 points, or1.48 per cent , to 3,700.65 and the Nasdaq Composite dropped189.84 points, or 1.47 per cent , to 12,698.45.

The pan-European STOXX 600 index rose 0.67 per cent , while Britain's FTSE 100 index closed up 1.7 per cent on its firstpost-Brexit trading day.

British Prime Minister Boris Johnson ordered England into a new national lockdown to contain a surge in COVID-19 cases that threatens to overwhelm parts of the health system, while NewYork Governor Andrew Cuomo said his state has found its first case of the more contagious, "UK" strain of the coronavirus, raising concerns about threats to hospital capacity.

Britain began vaccinating its population on Monday with the COVID-19 shot developed by Oxford University and AstraZeneca.

With the lag between a full vaccine roll-out and a global economic recovery, investors will count on central banks to keepmoney cheap.

Minutes of the Federal Reserve's Dec. 15-16 policy meetinga re due on Wednesday and should offer more details on discussions about making the US central bank's forward policy guidance more explicit and the chance of a further increase in asset purchases this year.

Friday brings the US employment report for December.

In currency trading, the US dollar recovered after falling to its lowest level since April 2018.

The dollar index rose 0.149 per cent , with the euro up 0.92 per cent to $1.2249.

The Japanese yen strengthened 0.06 per cent versus the greenback to103.14 per dollar, while Sterling was last trading at$1.3564, down 0.78 per cent on the day.

Spot gold prices gained 2.3 per cent , while US crude oilfutures fell 1.9 per cent to settle at $47.62 a barrel and Brentfutures dropped 1.4 per cent to $51.09.

Oil prices slipped after OPEC+ failed to decide whether to increase output in February and agreed to meet again on Tuesday.

US Treasury yields retreated from early gains as stock indexes tumbled.

US Treasury yields edged higher as traders repositioned at the start of trading in the new year. The benchmark 10-year yield was last up less than a basis point at0.9165 per cent .

Published on January 05, 2021

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