European stocks whose fortunes are pegged to the reopening of the world economy fell on Wednesday, while tech stocks rallied, as concerns over coronavirus flared up.
The Stoxx 600 index slipped just 0.1 per cent in the first hour of trading. The seemingly calm performance of the overall index masked a rotation out of financial, consumer and energy stocks that had been in vogue among investors who were banking on vaccine rollouts rapidly enabling life to return to normal, while the tech shares that benefit from lockdowns and homeworking outperformed.
The financials subsector of the Stoxx 600 dropped by 0.7 per cent while its small group of technology businesses rose by 0.8 per cent. A similar narrative emerged in London, where the FTSE 100 fell 0.1 per cent but investors backed out of financial and energy stocks.
The moves come amid mounting angst over a new wave of the virus in Europe and a move by Brussels to tighten vaccine exports.
“What we lost sight of recently is that pandemic is still not over,” said Olivier Marciot, senior cross-asset investment manager at Unigestion. “Now all of a sudden everyone is realising the route to reopening is not that simple, and all these trades that were based on high expectations of reopening have been turning around.”
European Commission proposals set to be unveiled later on Wednesday would widen the basis for stopping shipments of coronavirus vaccines to countries that import from the EU but refuse to export their own vaccine production. The move follows delayed vaccine rollouts across Europe and a reintroduction of lockdown measures on the continent.
The measures could in principle enable Brussels to stop shipments of BioNTech/Pfizer and Moderna vaccines made in the bloc to Britain.
Investors sheltered from the economic uncertainty by moving into government bonds, which have sold off rapidly in recent months as concerns a rapid rebound in US economic growth would cause strong bout of inflation.
The yield on the 10-year US Treasury, which moves inversely to its price, declined by 0.03 percentage points to just over 1.6 per cent. The equivalent German Bund yield fell by as much as 0.03 per cent to minus 0.37 per cent, its lowest since February 16.
The dollar, another haven asset, rose 0.3 per cent against a basket of currencies. The euro fell 0.3 per cent against the dollar to $1.183. Sterling also weakened, losing 0.5 per cent.
Futures markets signalled that Wall Street’s main indices would open higher later in the day, led by tech shares. Contracts that bet on the performance of the top 100 stocks on the technology-focused Nasdaq Composite rose 0.6 per cent. Those on the broader S&P 500 index gained 0.2 per cent.