US stocks slipped for the fourth consecutive day on Monday as investors awaited word on whether policymakers in Washington would come to agreement on a $908bn stimulus package.
The S&P 500 slid 0.4 per cent, with more than 70 per cent of the companies within the benchmark falling at the start of the week. Shares of banks and energy groups were among the hardest hit.
Technology stocks were among the few corners of the market not weaker, and the Nasdaq Composite was 0.5 per cent higher on Monday as Netflix, Amazon and Tesla climbed.
Investors were left debating whether Democrats and Republicans in Washington could come to agreement on a fresh stimulus bill this year, although progressive senator Bernie Sanders urged his party on Monday to rebuff the potential deal over its smaller size.
Wall Street, which had started the day on solidly stronger ground, weakened as the trading sessions wore on and cities from London to Boston tightened lockdowns as coronavirus cases swelled. New York governor Andrew Cuomo said on Monday that the city, the nation’s largest, could “very well” be on a path to a second shutdown of non-essential businesses.
The Russell 2000 index of small-cap companies, seen as a barometer on the country’s economic heartland, had started the day up as much 1.7 per cent. Those gains were shaved down to just 0.1 per cent by the close.
The weakness in the US followed a relatively upbeat day in Europe, after the UK and EU extended trade talks. The region-wide Stoxx Europe 600 index closed up 0.4 per cent while Germany’s Xetra Dax was 0.8 per cent higher.
“With just weeks to go before the end of the year, Brexit is the only story moving markets at the moment,” said Peter Dixon, chief economist at Commerzbank.
He added that equity markets remained driven by “general optimism” about a return to economic normality next year, as well as central banks’ bond-buying schemes that have pushed unprecedented amounts of new money into the financial system.
“As long as central banks continue providing all this liquidity, stock markets are going to remain bid,” he said.
The UK’s exporter-heavy FTSE 100 index lagged behind European peers on Monday, closing down 0.2 per cent. This followed a 0.8 per cent rise in the pound against the dollar.
UK and EU negotiators had set Sunday as their deadline for trade talks, but have indicated the discussions will continue until Christmas. UK prime minister Boris Johnson and European Commission president Ursula von der Leyen have issued stark warnings about no deal.
“The market view has been, and remains, that there will be some kind of deal done,” said Paul Leech, co-head of global equities at Barclays.
Brent crude rose 0.6 per cent to settle at $50.29 a barrel. Monday’s move in the global oil benchmark followed an explosion on a tanker at the port of Jeddah in Saudi Arabia. Most of Saudi Arabia’s oil production and export terminals are, however, on the opposite side of the country, limiting the market reaction.
Investors showed some interest in haven assets, pushing yields on five- and 10-year Treasuries marginally lower. Yields fall as bond prices rise.
Investor optimism about 2021 was veering dangerously towards “groupthink”, Absolute Strategy Research said in comments accompanying its latest survey of investor sentiment.
A record proportion of respondents, 71 per cent, thought global equities would be higher in a year’s time, representing the most bullish findings in the survey’s six-year history.
“This crowding of views points to volatility if the consensus stance gets challenged by events,” said ASR.
Additional reporting by David Sheppard in London