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- European stocks and oil fell by more than 1%, led by basic resources and construction, as tightening lockdowns in the region raised concerns about the economic outlook.
- Progress on US stimulus talks took a backseat, as investors in Europe focussed on the impact of a resurgence in cases of Covid 19.
- A weaker dollar helped boost gold above $1,920 an ounce, but did little to stop a slide in crude prices, which came under pressure from concern over another downturn in demand.
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European stocks broke ranks with global equities and fell broadly, as lockdown restrictions tightened in several major cities in the region, which hit the oil price and overshadowed the boost to investor risk appetite from progress in US stimulus talks.
The number of cases of Covid-19 in the European Union and the UK is rising at a rate of over 200,000 a day right now, based on data from Johns Hopkins University, topping even the United States. Spain, Italy and Britain have all imposed localized lockdowns, as infections and hospitalizations have surged, just ahead of the onset of the winter flu season.
The Stoxx 600 fell 1.2%, led by declines in economically-sensitive sectors, such as construction, basic materials and industrial goods sectors. The FTSE 100 was among the biggest losers among the major indices, down 1.6%, while the trade-sensitive DAX fell 1.3%. The MSCI All-World index was up 0.3%.
"There remains no doubt that the regular or normal 'macro' inputs (data, central banks) are little more than flotsam and jetsam in an ocean of uncertainty, in which politics (Brexit, US fiscal package and elections) and pandemic (infections, vaccines, lockdown measures) rule the waves," ADM Investor Services chief economist Marc Ostwald said.
House Speaker Nancy Pelosi said on Tuesday that she and US Treasury Secretary Steve Mnuchin were still talking, as a deadline she had set over the weekend for a vote on a new bill passed.
President Donald Trump signaled on Tuesday that he wanted an even larger deal than the $2.2 trillion bill proposed by House Democrats, but Republicans are throwing cold water on the prospect of enacting a deal soon.
"The gap between the two sides has certainly narrowed in terms of the headline number with the Republicans upping their offer to $1.9trn, however splits still remain on state and local aid as well as liability protections for businesses," CMC chief markets analyst Michael Hewson said.
"This would suggest that last night's optimism over the framework for a deal was somewhat misplaced, as once again Pelosi and Mnuchin agreed to pick up for further talks later this afternoon," he said.
US stock futures eased, reflecting the more downbeat mood across Europe. Futures on the S&P 500 and Nasdaq 100 were down between 0.2 and 0.3%, indicating a modestly lower start on Wall Street at the opening bell.
A 0.4% drop in the dollar index supported the gold price, which tends to move inversely to the US currency. Gold was last up 0.4% around $1,922 an ounce, its highest in around a week, having dipped below $1,900 briefly the day before.
Oil, meanwhile, dropped by around 1% on the day, following an unexpected increase in privately held US crude inventories, and after the Organization of the Petroleum Exporting Countries and their partners signaled they had no plans to restrict crude output to protect prices.
With supply showing no signs of declining and demand under threat from the surge in cases of Covid-19 in Europe, Brent crude futures were last down 1.4% at $42.55 a barrel, while WTI futures also lost 1.4% to trade around $41.20 a barrel.
"Google mobility data is already showing that workplaces, retail, recreational sites and transport hubs in Germany, the UK, France, Italy and Spain are 20.1% lower than pre-pandemic levels, and this is could be an early signal that oil demand is starting to taper in Europe," StoneX energy analyst Kevin Solomon said in a note on Tuesday.
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