By David Randall
NEW YORK (Reuters) – World equity markets dipped Thursday after a three-day rally and European government bonds edged higher as worse than expected U.S. economic data pointed to a long road to recovery from the coronavirus pandemic.
Market optimism over an economic rebound has helped push global equities to three-month highs and overshadowed concerns ranging from rising tensions between the U.S. and China and the worst period of civil unrest in the U.S. in decades.
“While the stock market has rebounded dramatically from the March lows on hopes of a faster-than-expected economic recovery, the stock market seems to be ignoring trade tensions with China. This is one of the biggest risks for the stock market in the near-term,” said Mark Tepper, president and chief executive of Strategic Wealth Partners.
MSCI’s gauge of stocks across the globe shed 0.30% following broad declines in Europe and modest gains in Asia.
In morning trading on Wall Street, the Dow Jones Industrial Average fell 51.49 points, or 0.2%, to 26,218.4, the S&P 500 lost 10.32 points, or 0.33%, to 3,112.55 and the Nasdaq Composite dropped 20.36 points, or 0.21%, to 9,662.56.
The euro rose and European government bonds gained after the European Central Bank (ECB) ramped up its Pandemic Emergency Purchase Programme (PEPP) to 1.35 trillion euros from 750 billion euros ($843 billion), extend it until June 2021 at the earliest and pledged to reinvest the proceeds until at least the end of 2022.
This was beyond what most analysts had predicted and followed a domestic stimulus package from Germany on Wednesday.
“This reflects the “we will do what it takes” mentality of central bankers,” said Neil Birrell, Chief Investment Officer at Premier Miton, adding it was “likely to keep markets happy.”
In the U.S., state unemployment benefits totaled a seasonally adjusted 1.877 million for the week ended May 30, down from 2.126 million the prior week, the Labor Department reported on Thursday. Economists polled by Reuters had forecast 1.8 million initial claims in the latest week.
Benchmark 10-year notes last fell 9/32 in price to yield 0.7903%, from 0.761% late on Wednesday.
Concerns that a prolonged recession would build up inventories pushed oil prices lower.
U.S. crude recently fell 1.56% to $36.71 per barrel and Brent was at $39.46, down 0.83% on the day.
(Reporting by David Randall; Editing by Bernadette Baum)