LONDON: World stocks were set for their seventh straight day of losses on Monday, as investors nervy about the possibility of a prolonged U.S. government shutdown and a worsening global economy opted for the safety of bonds and gold.
MSCI’s world equity index, which tracks shares in 47 countries, was 0.15 percent lower on the day and down almost 7 percent in the past seven sessions — its worst stretch of daily losses since January 2016. The index is also just off its lowest level since March 2017.
The U.S. Senate has been unable to break an impasse over U.S. President Donald Trump’s demand for more funds for a wall on the border with Mexico, and a senior official said the shutdown could continue until Jan. 3.
So much so that U.S. President Donald Trump’s Treasury secretary called top U.S. bankers on Sunday amid an ongoing rout on Wall Street and made plans to convene a group of officials known as the “Plunge Protection Team.”
U.S. stocks have fallen sharply in recent weeks on concerns over slowing economic growth, with the S&P 500 index on pace for its biggest percentage decline in December since the Great Depression. The Nasdaq has fallen nearly 22 percent from its Aug. 29 high.
European stocks followed Asian bourses lower, with a pan-European index lower half a percent on the day and a shade away from a one-year low hit on Friday.
This added to a similar move in MSCI’s broadest index of Asia-Pacific shares outside Japan, though losses were limited as many bourses were either shut or set to close early ahead of Christmas.
By 1000 GMT, Britain’s FTSE 100 had fallen 0.5 percent, while France’s CAC and Spain’s IBEX had eased 0.9 and 0.5 percent respectively. Germany’s DAX and Italy’s FTSE MIB were shut for Christmas.
GLOBAL SLOWDOWN
The political uncertainty has only added to the air of risk aversion, punishing equities to the benefit of bonds. Ten-year Treasury yields were near their lowest since August at 2.789 percent, having fallen over 40 basis points in just six weeks.
The gap between two- and 10-year yields has shrunk to only 14 basis points, a flattening of the curve that has sometimes heralded economic turning points in the past.
The flight to safe havens again boosted the Japanese yen, with the dollar near a three-month trough at 111.02 yen on Monday. It fared better against the euro, which was undermined by a run of poor European data. The single currency hovered at $1.1399, after being as high as $1.1485 last week.
Against a basket of currencies, the dollar index was a shade softer at 96.745.
Gold too has regained its appeal, holding near recent six-month peak around $1,262.6300 per ounce.
Oil prices were near their lowest since the third quarter of 2017, having shed 11 percent last week.